nep-eff New Economics Papers
on Efficiency and Productivity
Issue of 2024‒02‒19
eleven papers chosen by

  1. Regional productivity differences in the UK and France: from the micro to the macro By Kauma, Bridget; Mion, Giordano
  2. Making the invisible hand visible: managers and the allocation of workers to jobs By Minni, Virginia Magda Luisa
  3. Techies and Firm Level Productivity By J.J. Harrigan; Ariell Reshef; Farid Toubal
  4. Does FTA Import Utilization Enhance Firm Performance? An Assessment of the Philippine Manufacturing Sector By Quimba, Francis Mark A.; Andrada, Abigail E.; Moreno, Neil Irwin S.
  5. Informal Sector, Competition and Labor Productivity in Africa: Evidence from Firm-Level Data By Sara Zouiri
  6. Labour market power: New evidence on Non-Compete Agreements and the effects of M&A in the UK By Julian Alves; Jason Greenberg; Yaxin Guo; Ravija Harjai; Bruno Serra; John Van Reenen
  7. Business Model Contributions to Bank Profit Performance: A Machine Learning Approach By F. Bolivar; Miguel A. Duran; A. Lozano-Vivas
  8. Agglomeration Effects Exist but Are Limited By Haapamäki, Taina; Riukula, Krista; Väänänen, Touko
  9. Robots and Extensive Margins of Exports - Evidence for Manufacturing Firms from 27 EU Countries By Joachim Wagner
  10. Dynamics of productive investment and gaps between the United States and EU countries By Hanzl-Weiss, Doris; Stehrer, Robert
  11. Do larger firms exert more market power? Markups and markdowns along the size distribution By Mertens, Matthias; Mottironi, Bernardo

  1. By: Kauma, Bridget; Mion, Giordano
    Abstract: We propose a new data resource that attempts to overcome limitations of standard firm-level datasets for the UK (like the ARD/ABS) by building on administrative data covering the population of UK firms with at least one employee. We also construct a similar dataset for France and use both datasets to: 1) Provide some highlights of the data and an overall picture of the evolution of aggregate UK and French productivity and markups: 2) Analyse the spatial distribution of productivity in both countries at a fine level of detail - 228 Travel to Work Areas (TTWAs) for the UK and 297 Zones da'emploi (ZEs) for France - while focusing on the role of economic density. Our findings suggest that differences in firm productivity across regions are magnified in the aggregate by an increasing productivity return of density along the productivity distribution.
    Keywords: firm-level dataset; merging; BSD; FAME; VAT; FICUS; FARE; productivity; markups; UK; France; regional disparities; density
    JEL: R12 D24
    Date: 2023–11–01
  2. By: Minni, Virginia Magda Luisa
    Abstract: Why do managers matter for firm performance? This paper provides evidence of the critical role of managers in matching workers to jobs within the firm using the universe of personnel records from a large multinational firm. The data covers 200, 000 white-collar workers and 30, 000 managers over 10 years in 100 countries. I identify good managers as the top 30% by their speed of promotion and leverage exogenous variation induced by the rotation of managers across teams. I find that good managers cause workers to reallocate within the firm through lateral and vertical transfers. This leads to large and persistent gains in workers' career progression and productivity. Seven years after the manager transition, workers earn 30% more and perform better on objective performance measures. In terms of aggregate firm productivity, doubling the share of good managers would increase output per worker by 61% at the establishment level. My results imply that the visible hands of managers match workers' specific skills to specialized jobs, leading to an improvement in the productivity of existing workers that outlasts the managers' time at the firm.
    Keywords: managers; career trajectories; internal labor markets; productivity
    JEL: J24 M5
    Date: 2023–10–05
  3. By: J.J. Harrigan; Ariell Reshef (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Farid Toubal (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique, CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique, CEPR - Center for Economic Policy Research - CEPR, LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique)
    Abstract: We study the impact of techies—engineers and other technically trained workers—on firm-level productivity. We first report new facts on the role of techies in the firm by using French administrative data and unique surveys. Techies are STEM-skill intensive and are associated with innovation, as well as with technology adoption, management, and diffusion within firms. Using structural econometric methods, we estimate the causal effect of techies on firm-level Hicks-neutral productivity in both manufacturing and non-manufacturing industries. We find that techies raise firm-level productivity, and this effect goes beyond the employment of R&D workers, extending to ICT and other techies. In non-manufacturing firms, the impact of techies on productivity operates mostly through ICT and other techies, not R&D workers. Engineers have a greater effect on productivity than technicians.
    Keywords: productivity, R&D, ICT, techies, STEM skills.
    Date: 2024–01–31
  4. By: Quimba, Francis Mark A.; Andrada, Abigail E.; Moreno, Neil Irwin S.
    Abstract: This study assessed how utilizing free trade agreements (FTAs) in imports affects the performance of Philippine manufacturing firms. It used recent developments in differences-in-differences (DID) estimation with multiple time periods and variations in treatment timing. This DID method was applied to a rich Philippine microdata set that integrates the annual firm surveys/censuses with import transaction data. The empirical analysis reveals that the FTA import utilization effects varied across different groups and periods; some estimates did not have the expected signs. Overall, productivity gains were limited for importers who started to use FTAs. However, the productivity losses observed from quitting FTA use suggest potential long-run productivity gains obtained by consistent FTA users. The results also confirm the trade-facilitating effects of FTAs, as FTA starters consistently experienced substantial import growth. Meanwhile, quitting use only generated short-term adverse effects on firm imports, implying that some importers might have eventually increased their imports from non-FTA partners. Among others, policymakers must prioritize easing FTA procedures, intensifying firm support mechanisms, and improving data access and monitoring. The country’s ongoing effort in monitoring import surges could also be leveraged to identify sectors that heavily rely on imported intermediate inputs. This could facilitate their participation and upgrading in global value chains. Comments to this paper are welcome within 60 days from the date of posting. Email
    Keywords: free trade agreements;firm performance;import facilitation;difference-in-differences;doubly robust;FTA
    Date: 2023
  5. By: Sara Zouiri (Mohammed V University in Rabat)
    Abstract: The informal sector, a key feature of African economies, can cause significant distortions that result in loss of growth and constrain countries’ development. Many papers have shown that at the firm level, the informal sector may impact the performance of the formal sector through competition. The purpose of this study is to examine the relationship between informal sector competition and labor productivity in the formal sector in Africa. To this end, we use data from the World Bank Enterprise Survey (WBES) conducted between 2009 and 2020 for 36 African countries. The regression results reveal a negative and statistically significant relationship between informal sector competition and labor productivity. The policy implications are twofold. First, policies to reduce the size of the informal sector and/or prevent negative spillovers from informal competition are required to improve productivity. Second, in order to stimulate the formal sector and promote its expansion, policy measures to improve the macroeconomic and institutional context of the region are needed.Length: 25
    Date: 2023–12–20
  6. By: Julian Alves; Jason Greenberg; Yaxin Guo; Ravija Harjai; Bruno Serra; John Van Reenen
    Abstract: Monopsony power is an important feature of modern labour markets. We examine its impact on workers. We report the first representative survey of Non-Compete-Agreements (NCA) in the UK and find that about 26% of workers appear to be covered, a higher fraction than in comparable surveys in the US (18%) and Italy (16%). Although NCAs are more prevalent for skilled workers, a large number of low skilled workers are also subject to NCAs (e.g. over a fifth of plant operators). Moreover, although NCAs are associated with higher training (conditional on other measures of skills), we argue that such benefits are unlikely to justify their high prevalence. Finally, we examine the impact of over 2, 000 M& UK panel data between 1997 and 2022 (over 900, 000 observations). The data suggests that M&A tends to reduce employment growth in the merged entity (from 3% a year prior to the merger to about zero in the subsequent five years), particularly in target firms. However, there is no evidence of any falls in average wage growth (in acquirer or target) as monopsony would predict - if anything, average wages are higher. Nor does profitability or productivity change post-merger.
    Keywords: management practices, productivity, competition
    Date: 2024–01–29
  7. By: F. Bolivar; Miguel A. Duran; A. Lozano-Vivas
    Abstract: This paper analyzes the relation between bank profit performance and business models. Using a machine learning-based approach, we propose a methodological strategy in which balance sheet components' contributions to profitability are the identification instruments of business models. We apply this strategy to the European Union banking system from 1997 to 2021. Our main findings indicate that the standard retail-oriented business model is the profile that performs best in terms of profitability, whereas adopting a non-specialized business profile is a strategic decision that leads to poor profitability. Additionally, our findings suggest that the effect of high capital ratios on profitability depends on the business profile. The contributions of business models to profitability decreased during the Great Recession. Although the situation showed signs of improvement afterward, the European Union banking system's ability to yield returns is still problematic in the post-crisis period, even for the best-performing group.
    Date: 2024–01
  8. By: Haapamäki, Taina; Riukula, Krista; Väänänen, Touko
    Abstract: Abstract In economics, the regional densification of economic activity is referred to as agglomeration. The effects of agglomeration are often referred to when discussing the wider economic benefits of transportation infrastructure projects. The magnitude of these effects has not been extensively studied in Finland. In this brief, we present results from a study that examines the effect of agglomeration on productivity in the Helsinki region. Agglomeration, defined as job-to-job accessibility, was found to have a positive effect on employees’ wages. However, the results at the establishment-level are less precise and statistically insignificant. According to the results, increased accessibility increases other operating expenses such as rents, potentially explaining the lack of statistically significant effects on establishment-level productivity. The results indicate that agglomeration benefits are predominantly intraregional, with interregional accessibility having little impact on these benefits. Consequently, the ratio between agglomeration benefits and direct benefits of transportation infrastructure projects varies depending on the project. Taxes and similar payments on increased wages due to accessibility increases could be included as a separate item in cost-benefit analysis.
    Keywords: Agglomeration, Productivity, Transport project, Cost-benefit analysis, Accessibility, Wider economic impacts
    JEL: R12 R41 R42
    Date: 2024–01–23
  9. By: Joachim Wagner (Leuphana Universität Lüneburg, Institut für Volkswirtschaftslehre and Kiel Centre for Globalization)
    Abstract: The use of robots by firms can be expected to go hand in hand with higher productivity, higher product quality and more product innovation, which should be positively related to export activities. This paper uses firm level data from the Flash Eurobarometer 486 survey conducted in February – May 2020 to investigate the link between the use of robots and export activities in manufacturing enterprises from the 27 member countries of the European Union. Applying standard parametric econometric models and a new machine-learning estimator, Kernel-Regularized Least Squares (KRLS), we find that firms which use robots do more often export, do more often export to various destinations all over the world, and do export to more different destinations. The estimated robots premium for extensive margins of exports is statistically highly significant after controlling for firm size, firm age, patents, and country. Furthermore, the size of this premium can be considered to be large. Extensive margins of exports and the use of robots are positively related.
    Keywords: Robots, exports, firm level data, Flash Eurobarometer 486, kernel-regularized least squares (KRLS)
    JEL: D22 F14
    Date: 2024–01
  10. By: Hanzl-Weiss, Doris; Stehrer, Robert
    Abstract: This report offers a detailed documentation and assessment of the differences in real productive investment between the United States and EU countries, focusing especially on the period 2013-2019. The analysis is based on capital stock and gross fixed capital formation (GFCF) data taken from Eurostat and the recent EU KLEMS releases, which provide comparable data for the US. The study considers various measures: investment gaps (defined as the difference in investment rates); the growth of real GFCF; and the accumulation of stocks. It documents differences in trends and in asset-type composition, as well as variations across the different EU countries. The study thus brings the existing literature up to date and adds investment dynamics to the discussion. The findings indicate the existence of a gap in productive investment in the period since the onset of the global financial crisis (caused largely by lower rates of investment, specifically in tangible information and communication technology and intangible assets) and gaps for larger EU member states. When we consider investment dynamics, we find more robust growth rates in productive investment in the EU than in the US over this period; however, again investment was lower in telecommunications equipment and software and databases. Since growth rates in the EU27 and the US have been similar since 2013, the EU27 has been unable to catch the US up in terms of capital accumulation. However, these results are sensitive to the application of asset price deflators: when US deflators are applied to the EU27, the differences are much less significant.
    Keywords: Productive investment, investment gap, investment dynamics, European Union, US
    JEL: E22
    Date: 2024
  11. By: Mertens, Matthias; Mottironi, Bernardo
    Abstract: Several models posit a positive cross-sectional correlation between markups and firm size, which characterizes misallocation, factor shares, and gains from trade. Accounting for labor market power in markup estimation, we find instead that larger firms have lower product markups but higher wage markdowns. The negative markup-size correlation turns positive when conditioning on markdowns, suggesting interactions between product and labor market power. Our findings are robust to common criticism (e.g., price bias, non-neutral technology) and hold across 19 European countries. We discuss possible mechanisms and resulting implications, highlighting the importance of studying input and output market power in a unified framework.
    Keywords: markups; markdowns; market power; firm size
    JEL: L11 L13 L25 J42
    Date: 2023–09–21

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