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on Efficiency and Productivity |
| By: | Davide Luparello |
| Abstract: | This paper investigates how productivity dispersion relates to input misallocation using a model with staggered productivity shocks that create wedges between anticipated and realized productivity for any production input. With inputs allocated optimally ex ante but suboptimally ex post, dispersion in realized productivity contributes to ex post input misallocation. Analyzing European firm data from 2000–2017 reveals significant co-movement between productivity dispersion and capital/labor misallocation across industries. Productivity dispersion explains a substantial share of capital and labor misallocation (40% and 70%), and 10% of materials misallocation, confirming its key role in allocation frictions. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:baf:cbafwp:cbafwp25250 |
| By: | Eiji Goto; Jan P.A.M. Jacobs; Simon van Norden |
| Abstract: | We investigate the causes of changing productivity growth trend perceptions using a novel state-space framework for statistically efficient estimation of growth trends in the presence of data revision. Uncertainty around contemporary US productivity growth trends has been exacerbated by data revisions that typically occur several years after the initial data release, as well as by publication lags. However, the largest source of revisions in perceived trends comes from future realizations of productivity growth. This underlines the importance of estimation uncertainty in estimates of trend productivity growth. |
| Keywords: | productivity, real-time data, news, trend-cycle decomposition |
| JEL: | C32 C51 E6 E24 O47 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:een:camaaa:2025-53 |
| By: | María Paula Álvarez Arboleda (Universidad de los Andes) |
| Abstract: | This paper investigates the role of consumer preferences in shaping the performance of manufacturing firms in Colombia. I use data from Colombian manufacturing firms between 2000 and 2012 to decompose the contribution of consumer preferences into those attributable to preferences for certain goods (horizontal differentiation) and for particular providers of those goods (vertical differentiation). Employing a model that integrates consumer demand, following a nested CES structure, with firm production, I use key demand parameters to decompose the variance of firm sales into technical efficiency, input costs, and vertical and horizontal differentiation. I find that vertical differentiation plays a dominant role in explaining sales variance (85.9%), while horizontal differentiation and technical efficiency contribute to a lesser extent (26.2% and 29.2%, respectively). These findings underscore the importance of consumer preferences in determining firm outcomes, showing that demand-driven factors, frequently subsumed in productivity measures, outweigh traditional supply-side drivers that explain firms’ performance. |
| Keywords: | size of manufacturing firms; quality; differentiation; productivity; preferences |
| JEL: | L25 L60 O47 D22 D24 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:col:000089:021544 |
| By: | Enghin Atalay; Ali Hortaçsu; Nicole Kimmel; Chad Syverson |
| Abstract: | We examine the recent slow growth in manufacturing productivity. We show that nearly all measured TFP growth since 1987—and its post-2000s decline—comes from a few computer-related industries. We argue conventional measures understate manufacturing productivity growth by failing to fully capture quality improvements. We compare consumer to producer and import price indices. In rapidly changing industries, consumer price indices indicate less inflation, suggesting mismeasurement in standard industry deflators. Using an input-output framework, we estimate that TFP growth is understated by 1.7 percentage points in durable manufacturing and 0.4 percentage points in nondurable manufacturing, with no mismeasurement in nonmanufacturing industries. |
| JEL: | D2 E01 L6 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34264 |
| By: | Margaret S. McMillan; Hundanol A. Kebede |
| Abstract: | When estimating a production function, economists usually assume that firms fully employ all their available inputs. Contrary to this assumption, we document that underemployment of quasi-fixed inputs or low capacity utilization rates (CUR) is common across firms, especially in poor countries. Low CURs are correlated with supply-side constraints such as shortages of material inputs and electricity; they are also correlated with demand-side constraints such as a lack of access to markets. We show that when firms underemploy their quasi-fixed inputs, the assumptions behind standard production function estimation techniques-such as the control function approach-are invalid, and these techniques produce biased estimates of TFP. We demonstrate this using unique panel data from Ethiopia with information on actual and full capacity input demand. We find that measures of TFP that do not account for CUR considerably underestimate ’true’ productivity when CUR is low but not when CUR is high. This leads to an exaggeration of the TFP gap between rich and poor countries. |
| JEL: | O14 O40 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34279 |
| By: | Klaus Friesenbichler; Agnes Kügler |
| Abstract: | We study the short- and medium-term extensive and intensive margins of intangible investments in firm growth processes. The intensive and extensive margins of investment are both highly skewed and differ across sectors. Less productive firms are less likely to invest in intangibles, while incorporated firms are more likely to do so. Intangible capital only complements physical capital for a limited number of firms. Intangible investment is positively associated with short-term productivity growth, particularly among firms that consistently invest over time. The medium-term effects on productivity are limited and are largely confined to top-performing firms. We find systematic short-term effects of intangible investment on employment growth. Regular investment patterns correlate with higher employment growth over both time horizons. These results challenge the conventional assumption that intangible capital uniformly enhances firm performance. They also highlight the importance of sustained investment behavior and sectoral context. |
| Keywords: | intangible capital, employment, productivity, investment, firm growth, sample selection, Austria, microdata |
| Date: | 2025–09–17 |
| URL: | https://d.repec.org/n?u=RePEc:wfo:wpaper:y:2025:i:711 |
| By: | Bryson, Alex (University College London); Tanaka, Mari (University of Tokyo) |
| Abstract: | The effects of trade unions on firm performance are theoretically ambiguous. The sizable empirical literature on their effects is almost exclusively confined to developed countries, particularly those in North America and Europe. We contribute to the literature by estimating union effects on firm performance in about 40, 000 firms in 77 developing countries between 2002 and 2011. In doing so, we exploit standardized firm level data collected by the World Bank. We find positive partial correlations between unionization and firm labor productivity and wages, especially in lower-income countries. These positive effects persist when we instrument for union presence, consistent with recent evidence of union positive effects on productivity and wages in western industrialized countries. |
| Keywords: | enterprise data, developing countries, wages, productivity, trade unions, union formation |
| JEL: | J51 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18128 |
| By: | Minni, Virginia (University of Chicago Booth School of Business) |
| 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 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. 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: | worker productivity, career trajectories, internal labor markets, managers |
| JEL: | J24 M5 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18137 |
| By: | Olivier Gonzalez |
| Abstract: | Although fewer companies declared cessation of payments between 2020 and 2022, in median terms, less productive companies were the most prone to bankruptcy. However, the cleansing process was mitigated during the pandemic, as evidenced by the decline in the median productivity level of firms a year before their bankruptcy. This could explain part of the decline in productivity observed across French firms as a whole. This effect should be limited and temporary as firms, which would have become insolvent without the support measures, increasingly fail. <p> Si moins d’entreprises sont entrées en cessation de paiement entre 2020 et 2022, les défaillances touchent toujours, en termes de médiane, des entreprises moins productives. Le processus de sélection des entreprises a cependant été atténué pendant la crise sanitaire, comme constaté par la baisse du niveau de productivité médian des entreprises qui ont fait défaillance. Ceci pourrait expliquer une partie de la baisse de la productivité observée pour l’ensemble des entreprises françaises. Cet effet serait limité et temporaire avec le rattrapage en cours des défaillances des entreprises qui auraient fait défaut en temps normal. |
| Date: | 2025–05–30 |
| URL: | https://d.repec.org/n?u=RePEc:bfr:econot:405 |
| By: | Celiku, Bledi; Ubfal, Diego Javier; Valdivia, Martin |
| Abstract: | This paper estimates the gender gap in the performance of firms in Peru using representative data on both formal and informal firms. On average, informal female-led firms have lower sales, labor productivity, and profits compared to their male-led counterparts, with differences more pronounced when controlling for observable determinants of firm performance. However, gender gaps are only significant at the bottom of the performance distribution of informal firms, and these gaps disappear at the top of the distribution of informal firms and for formal firms. Possible explanations for the performance gaps at the bottom of the distribution include the higher likelihood of small, female-led firms being home-based, which is linked to lower profits, and their concentration in less profitable sectors. The paper provides suggestive evidence that household responsibilities play a key role in explaining the gender gap in firm performance among informal firms. Therefore, policies that promote access to care services or foster a more equal distribution of household activities may reduce gender productivity gaps and allow for a more efficient allocation of resources. |
| Date: | 2025–09–23 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:111218 |
| By: | Marcelo Caffera; Emilio Aguirre; Juan Baraldo; Hugo Laguna |
| Abstract: | As global demand for beef increases, balancing livestock productivity with environmental sustainability has become a policy priority. In response, Uruguay implemented the Sustainable Family Production Program (PFIS). Between 2015 and 2017, this program provided support to small and medium-sized cattle farmers to invest in technologies and management practices aimed at enhancing both productivity and climate resilience. This study provides the first causal evaluation of a national program designed to promote these dual objectives in the cattle sector. We assess the effect of PFIS on three outcomes: (i) technology adoption, (ii) productivity, and (iii) greenhouse gas emissions intensity. To identify causal effects, we use a regression discontinuity design based on a strict eligibility threshold, using panel data from producers between 2015 and 2020. Although we found no statistically significant effects on beef productivity per hectare or greenhouse gas emissions intensity during the study period, the program significantly increased adoption of good reproductive and herd management practices, including early weaning, controlled mating, and ovarian activity diagnosis. These results highlight both the potential and the limitations of integrated technology transfer programs in promoting sustainable intensification of extensive livestock systems. They also suggest the need for longer-term evaluations to capture potential impacts on productivity and emissions that may emerge as these technologies, particularly reproductive ones, influence aggregate outcomes. |
| Keywords: | Impact Evaluation; Livestock; Technology Adoption; Rural development |
| JEL: | Q12 Q16 D24 Q57 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:mnt:wpaper:2502 |
| By: | Christopher Cotton; Brent R. Hickman; John A. List; Joseph Price; Sutanuka Roy |
| Abstract: | Using field-experimental data (study-time tracking and randomized incentives), we identify a structural model of learning. Student effort is influenced by external costs/benefits and unobserved heterogeneity: motivation (willingness to study) and productivity (conversion rate of time into skill). We estimate academic labor-supply elasticities and skill technology. Productivity and motivation are uncorrelated. Low productivity, not low motivation, is the stronger predictor of academic struggles. School quality augments productivity and accelerates skill production. We find that dynamic skill complementarities arise mainly from children’s aging and from a feedback loop between investment activity and productivity, rather than from carrying forward past skill stocks. |
| JEL: | C90 C92 C93 I21 I22 I24 J24 O15 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34274 |
| By: | Adrian Ifrim; Robert Kollmann; Philipp Pfeiffer; Marco Ratto; Werner Roeger |
| Abstract: | The Euro Area faces persistently weak productivity growth alongside a sustained trade surplus and a trendless real exchange rate. This column shows that persistent productivity growth differentials relative to the rest of the world, are a key driver of Europe’s external surplus. Structural trade shifts, such as declining home bias and falling import prices, have offset the appreciation pressures from the productivity-growth gap. Weak domestic investment is partly driven by global forces, highlighting the limits of purely demand-based explanations and associated policy prescriptions. |
| Keywords: | European Union, trade surplus, real exchange rate, productivity growth. |
| Date: | 2025–09–04 |
| URL: | https://d.repec.org/n?u=RePEc:eca:wpaper:2013/394306 |
| By: | Broadbent, Ben; Di Pace, Federico; Drechsel, Thomas; Harrison, Richard; Tenreyro, Silvana |
| Abstract: | The UK economy experienced significant macroeconomic adjustments following the 2016 referendum on its withdrawal from the European Union. To understand these adjustments, this paper presents empirical facts using novel UK macroeconomic data and estimates a small open economy model with tradable and non-tradable sectors. We demonstrate that the referendum outcome can be interpreted as news about a future decline in productivity growth in the tradable sector. An immediate fall in the relative price of non-tradable goods induces a temporary “sweet spot” for tradable producers. Economic activity in the tradable sector expands in the short run, while the non-tradable sector contracts. Aggregate output, consumption and investment growth decelerate. |
| JEL: | E32 F17 F41 F43 O16 |
| Date: | 2024–07–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:118569 |
| By: | Krüger, Jens J.; Tarach, Moritz |
| Abstract: | The reduction of greenhouse gas emissions is the key action to limit global warming. An important source of greenhouse gas emissions and pollution is the inefficiency of production processes. We report results from a stochastic nonparametric efficiency analysis using directional distance functions to take account of undesirable outputs like greenhouse gases. With this approach, we are able to provide estimates of the potential emission reductions for 7 main sectors in 16 European countries. A specially adapted bootstrapping approach allows to implement a bias correction of the estimates and to compute confidence intervals. The results show that static efficiency improvements are a quantitatively important element of the emission reductions which are required to achieve the reduction targets of the European Union. |
| Date: | 2025–08–19 |
| URL: | https://d.repec.org/n?u=RePEc:dar:wpaper:156572 |