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on Efficiency and Productivity |
| By: | Jan De Loecker (KU Leuven and CEPR); Catherine Fuss (National Bank of Belgium, Economics and Research Department); Nathan Quiller-Doust (KU Leuven); Leonard Treuren (KU Leuven) |
| Abstract: | We separately observe variable input expenditure and expenditure on fixed inputs in novel firm-level data covering the Belgian manufacturing sector over the last decades. This permits a deeper investigation of two potential drivers of the globally observed widening gap between firms’ revenue and variable input expenditure: technology and market power. Across the board, cost structures have become less reliant on variable input expenditure over time, while expenditure on fixed inputs or overhead costs has increased in prominence. We relate these changes in firms’ cost structures to performance measures and document that markups and gross profit rates increase substantially as the role of variable costs in production diminishes. Profit rates net of fixed input expenditure also increase, but by substantially less than gross profit rates. Our results suggest that technological change can explain a considerable portion of the widening gap between revenue and variable input expenditure, but that markups increase by more than necessary to break even, and that this phenomenon operates remarkably similarly across different firms and industries. |
| Keywords: | Intermediate goods and services; Fixed cost; Markups; Technology. |
| JEL: | D2 D4 L1 O14 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbb:reswpp:202410-459 |
| By: | Gaygysyz Ashyrov; Nicolas Gavoille; Kjetil Haukås; Rasmus Bøgh Holmen; Jaan Masso |
| Abstract: | While attracting foreign direct investment (FDI) has been at the core of the economic policy of many countries since the 1980s, existing evidence of a causal foreign ownership effect on firm-level productivity is mixed. This paper revisits the productivity effect of foreign takeovers on domestic firms. Leveraging administrative firm-level data from Estonia, Latvia and Norway, we shed light on the following key questions: 1) Does the magnitude of the effect of foreign ownership depend on the host country's level of development?; 2) Does spatial, cultural, and economic proximity between the sending and receiving countries play a role in the foreign ownership effect?; and 3) To what extent are these effects heterogeneous across industries? By implementing a propensity score matching procedure, combined with a difference-in-differences approach, our results indicate that the productivity effect of foreign ownership greatly varies across host countries, sectors and the region of origin for the FDI. We document an overall positive but heterogeneous effect of foreign acquisitions on domestic firms, with a stronger productivity boost in Estonia and Latvia than in Norway. The effects in each country are concentrated on FDI from particular regions and specific economic sectors. These results suggest that the positive effect of FDI on receiving companies is conditional on both the characteristics of the investor and the acquisition target. |
| Keywords: | Productivity, foreign direct investment, foreign ownership, Northern Europe |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:mtk:febawb:148 |
| By: | OECD |
| Abstract: | The global productivity slowdown, characterised by a widespread deceleration in aggregate productivity growth rates, is a prevailing concern for policy makers and academics. In this context, this report summarises evidence on productivity growth and business dynamics, highlighting long-term trends and their drivers, as well as insights specific to the COVID-19 period, with relevant implications for future productivity and innovation. It underscores the role of productivity for employment and wages, and discusses challenges related to the digitalisation of the economy and the green transition. Additionally, it considers how the resurgence of industrial policies necessitates additional analysis to measure and coordinate government action. |
| Keywords: | Artificial intelligence, Business dynamism, COVID-19, Diffusion, Employment, Industrial policy, Innovation, Labour share, Productivity, Technological change |
| JEL: | J30 L10 O25 O30 O33 L52 |
| Date: | 2024–10–16 |
| URL: | https://d.repec.org/n?u=RePEc:oec:stiaaa:2024/7-en |
| By: | Amaresh K Tiwari |
| Abstract: | Using the universe of firms in Estonia, we study the implications of imports-led and FDI- facilitated automation for productivity and factor shares of tasks and value-added. First, in contrast to the findings for developed economies, we find that the aggregate labour share of value-added for automation adopting firms is higher than that for non-adopters, and has grown, among others, through the reallocation of economic activities towards adopting firms. Second, the aggregate total factor productivity of the adopters concurrently grew faster than that of the non-adopters. Third, from the micro-level study, we find that the estimated labour share of tasks has declined over time among the adopting firms and is lowest in firms that automate frequently, where the frequency of automation provides rich information on firm automation characteristics. The study emphasizes international spillovers and the creation of productive new jobs by multinational adopters among the reasons for the increase in the labour share of value-added for adopters, even as their labour share of tasks declined. Fourth, the productivity impact of automation is heterogeneous: (a) firms that automate regularly, (b) multinational adopters, and (c) firms that realize complementarities between automation and innovative management practices are among the most productive adopters. The latter establishes that the innovative management practices instituted by adopters are those that help discover and facilitate complementarities be- tween automation and human labour. |
| Keywords: | Imports-Led Automation, Foreign Direct Investment (FDI), Productivity, Labour Share, Factor Task Content of Production, Complementarities |
| Date: | 2023 |
| URL: | https://d.repec.org/n?u=RePEc:mtk:febawb:144 |
| By: | Corentin Lobet; Patrick Llerena; André Lorentz |
| Abstract: | We propose a disaggregated representation of production using an agent-based fund-flow model that emphasizes inefficiencies, such as factor idleness and production instability, and allows us to explore their emergence through simulations. The model incorporates productivity dynamics (learning and depreciation) and is extended with time-saving process innovations. Specifically, we assume workers possess inherent creativity that flourishes during idle periods. The firm, rather than laying off idle workers, is assumed to harness this potential by involving them in the innovation process. Results show that a firm's organizational and managerial decisions, the temporal structure of the production system, the degree of workers' learning and forgetting, and the pace of innovation are critical factors influencing production efficiency in both the short and long term. The co-evolution of production and innovation processes emerges in our model through the two-sided effects of idleness: the loss of skills through forgetting and the deflection of time from the production of goods to the production of ideas giving birth to idleness-driven innovations. In doing so, it allows us to question the status of labour as an adjustment variable in a productive organisation. The paper concludes by discussing potential solutions to this issue and suggesting avenues for future research. |
| Keywords: | Production Theory; Firm Theory; Agent-based model; Idleness; Innovation; Fund-flow |
| Date: | 2024–10–09 |
| URL: | https://d.repec.org/n?u=RePEc:ssa:lemwps:2024/27 |
| By: | Känzig, Diego R.; Williamson, Charles |
| Abstract: | We explore the increasing divergence between economic growth and energy consumption through energy-saving technical progress. Proposing a new measure of energy-saving technology, we study the underlying drivers in a semi-structural model of the U.S. economy. Our analysis shows that energy price shocks reduce consumption and stimulate energy-saving innovation, but also cause economic downturns and crowd out other innovations. Only energy-saving technology shocks can explain the negative co-movement between output and energy use. These sudden efficiency gains emerge as the primary driver of energy-saving technical change. Our findings highlight the importance of fostering energy-saving innovations in transitioning to a low-carbon economy. JEL Classification: E0, O30, Q32, Q43, Q55 |
| Keywords: | directed technical change, energy-saving, energy prices, innovation |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20242984 |
| By: | Mtshweni, Harry; Costa, King (Global Centre for Academic Research) |
| Abstract: | The downstream petroleum sector plays a critical role in the economic development of emerging economies by providing energy, employment, and opportunities for small and medium-sized enterprises (SMEs). However, various external factors, including regulatory frameworks, market volatility, and technological advancements, significantly impact the operational efficiency of SMEs in this sector. This paper explores how these external challenges affect SMEs, particularly those owned by Historically Disadvantaged Individuals (HDIs), in the petroleum industries of emerging markets. Focusing on the South African context, the paper examines global and African perspectives on operational efficiency, with case studies from Ghana, Nigeria, and Kenya. It highlights the importance of infrastructure development, local capacity building, and regulatory reforms in enhancing operational efficiency. Additionally, technological advancements such as automation and data analytics are explored as potential tools for improving SMEs’ performance. The paper concludes by offering practical recommendations for overcoming these challenges, including streamlining regulatory processes, promoting technological adoption, and fostering inclusive business models. By addressing these external factors, SMEs in the downstream petroleum sector can improve their competitiveness, contribute to economic transformation, and meet the growing energy demands of emerging economies. |
| Date: | 2024–09–21 |
| URL: | https://d.repec.org/n?u=RePEc:osf:osfxxx:rp3k4 |
| By: | Alienor Cameron; Maria Garrone |
| Abstract: | To reach its 2050 objective of carbon neutrality, the European Union (EU) must continue to step up its climate efforts, while ensuring the competitiveness of its industries is not harmed. The EU Emission Trading Scheme (ETS) is at the core of the bloc's industrial decarbonization efforts. This paper explores this topic by digging into whether there is a causal relationship between industrial firms' emission intensity and their economic and financial performance. We construct a dataset covering around 1, 200 industrial firms covered by the EU ETS' third phase and estimate a novel indicator of volume-based emission intensities for these firms. Applying an IV approach to a within-firm panel model, we find that firms' emission intensity is negatively related to their corporate performance, and that this does not depend on the competitive environment they operate in. |
| Keywords: | EU ETS, heavy industry, emission intensity, corporate performance. |
| JEL: | D22 H23 L51 Q58 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:drm:wpaper:2024-26 |
| By: | Bernardo Caldarola; Luca Fontanelli |
| Abstract: | Recent empirical evidence finds positive associations between digitalisation and industry concentration. However, ICT may not be all alike. We investigate the effect of the purchase of cloud services on the long run size growth rate of French firms. Our findings suggest that cloud services positively impact firm growth rates, with smaller firms experiencing more significant benefits compared to larger firms. This evidence suggests that the diffusion of cloud technologies may help mitigate concentration in the era of the digital transition by favouring the digitalisation and growth of smaller firms, especially when the cloud services provided are more advanced. |
| Keywords: | cloud, ICT, concentration, firm growth rate, firm performance |
| Date: | 2024–10–02 |
| URL: | https://d.repec.org/n?u=RePEc:ssa:lemwps:2024/25 |