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on Efficiency and Productivity |
| By: | Paul S. Koh (Yonsei University); Devesh Raval (Yonsei University) |
| Abstract: | The prevailing explanation for large, multi-product firms is economies of scope from inputs shared across production lines. Using the Federal Trade Commission's Line of Business Surveys, we show that manufacturers report substantial shared inputs for both capital and management/marketing expenses that are correlated with firm size and scope. We estimate a nested CES production function between line-specific and shared inputs, which are substitutes with a substitution elasticity of 2.6. For the average firm, reducing shared inputs by 50% decreases revenue by 3.4%. Finally, synergies from greater scope economies generated by pooling shared inputs in merger simulations are small. |
| Keywords: | Economies of scope, shared inputs, multiproduct firms, production function, productivity |
| JEL: | D24 L23 L40 L60 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:yon:wpaper:2025rwp-264 |
| By: | Timo Kuosmanen; Xun Zhou |
| Abstract: | This paper critically investigates standard total factor productivity (TFP) measurement in the public sector, where output information is often incomplete or distorted. The analysis reveals fundamental paradoxes under three common output measurement conventions. When cost-based value added is used as the aggregate output, measured TFP may paradoxically decline as a result of genuine productivity-enhancing changes such as technical progress and improved allocative and scale efficiencies, as well as reductions in real input prices. We show that the same problems carry over to the situation where the aggregate output is constructed as the cost-share weighted index of outputs. In the case of distorted output prices, measured TFP may move independently of any productivity changes and instead reflect shifts in pricing mechanisms. Using empirical illustrations from the United Kingdom and Finland, we demonstrate that such distortions are not merely theoretical but are embedded in widely used public productivity statistics. We argue that public sector TFP measurement requires a shift away from cost-based aggregation of outputs and toward non-market valuation methods grounded in economic theory. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.14795 |
| By: | Gabriele Ciminelli (Asian Development Bank); Guido Franco (Centro Studi Confindustria) |
| Abstract: | This paper investigates the impact of job protection deregulation on firms’ productivity, leveraging a size-based cutoff in the eligibility criteria of a pivotal 2014 labor market reform in Italy. The reform replaced reinstatement requirements with a progressive compensation system for unjust dismissals of new hires in firms with more than 15 employees, while leaving smaller firms unaffected. We find that total factor productivity increased by 1% in treated firms relative to control firms, on average, in each of the 5 years following the reform’s implementation. Labor productivity gains were slightly larger, also driven by capital deepening. Next, we extend the analysis to uncover how the productivity gains were distributed between employers and workers. Capital owners benefited more, as the reform led to a gradual decline in the labor share of value added, reaching 0.7 percentage points after 5 years. |
| Keywords: | employment protection legislation;job protection deregulation;total factor productivity;capital deepening;income distribution;labor share of income |
| JEL: | D22 D24 J08 J41 O43 |
| Date: | 2025–10–13 |
| URL: | https://d.repec.org/n?u=RePEc:ris:adbewp:021674 |
| By: | Mohammad Zeqi Yasin |
| Abstract: | Do industrial "superstars" help others up or crowd them out? We examine the relationship between the spillovers of superstar firms (those with the top market share in their industry) and the productivity dynamics in Indonesia. Employing data on Indonesian manufacturing firms from 2001 to 2015, we find that superstar exposures in the market raise both the productivity level and the growth of non-superstar firms through horizontal (within a sector-province) and vertical (across sectors) channels. When we distinguish by ownership, foreign superstars consistently encourage productivity except through the horizontal channel. In contrast, domestic superstars generate positive spillovers through both horizontal and vertical linkages, indicating that foreign firms do not solely drive positive externalities. Furthermore, despite overall productivity growth being positive in 2001-2015, the source of negative growth is mainly driven by within-group reallocation, evidence of misallocation among surviving firms, notably by domestic superstars. Although Indonesian superstar firms are more efficient in their operations, their relatively modest growth rates suggest a potential stagnation, which can be plausibly attributed to limited innovation activity or a slow pace of adopting new technologies. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.11139 |
| By: | Andreea Rotarescu (Wake Forest University, Department of Economics) |
| Abstract: | This paper studies the adverse long-term impact of declining bank health on aggregate productivity. I develop a simple model of productivity-enhancing investment where firm exposure to fragile banks leads to losses on both the intensive and extensive margins. The model highlights the existence of a bias in measuring observable TFP growth during episodes of heightened firm exits. To address this bias, I construct an exit-adjusted measure of productivity growth using data on Spanish firm-bank relationships and bank bailouts from 2007-2017 and use this measure to quantify the output loss from bank distress. The identification of the exit bias exploits regional variation in weak-bank density. A counterfactual analysis shows that, a decade after the banking crisis, output growth from the extensive margin recovers but the intensive margin proves much more persistent. Together, these dynamics amount to a cumulative loss of 3% of pre-crisis GDP over ten years. |
| Keywords: | Banking Crises; Firm Investment; Aggregate Productivity; Endogenous Exit; Sample Selection |
| JEL: | E22 G01 G21 G33 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:ris:wfuewp:021681 |
| By: | Feiyang (Amber); Xu; Poonacha K. Medappa; Murat M. Tunc; Martijn Vroegindeweij; Jan C. Fransoo |
| Abstract: | Generative AI solutions like GitHub Copilot have been shown to increase the productivity of software developers. Yet prior work remains unclear on the quality of code produced and the challenges of maintaining it in software projects. If quality declines as volume grows, experienced developers face increased workloads reviewing and reworking code from less-experienced contributors. We analyze developer activity in Open Source Software (OSS) projects following the introduction of GitHub Copilot. We find that productivity indeed increases. However, the increase in productivity is primarily driven by less-experienced (peripheral) developers. We also find that code written after the adoption of AI requires more rework. Importantly, the added rework burden falls on the more experienced (core) developers, who review 6.5% more code after Copilot's introduction, but show a 19% drop in their original code productivity. More broadly, this finding raises caution that productivity gains of AI may mask the growing burden of maintenance on a shrinking pool of experts. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.10165 |
| By: | Nicolás de Roux (Universidad de los Andes); Luis R. Martínez (Emory University); Camilo Tovar (International Monetary Fund); Jorge Tovar (Universidad de los Andes) |
| Abstract: | How do exporting firms navigate the loss of a major foreign market? This study examines the response of Colombian manufacturing firms to the collapse of trade with Venezuela, Colombia’s second largest trade partner. Trade disruptions began in 2009 when Venezuela restricted imports from Colombia and worsened with Venezuela’s protracted economic crisis after 2014, leading to a fall in trade of more than 90% by 2018. Using transaction-level customs data linked at the firm level to the Colombian manufacturing census, we use a difference-in-difference design based on previous exports to Venezuela to estimate the effect of the loss of this market on firm performance over a ten-year period. Our analysis yields four main findings: (i) affected firms experience a sharp and persistent decline in exports; (ii) while they survive, these firms significantly reduce their scale, lowering production, input use, investment, employment, and wages; (iii) however, traditional measures of total factor productivity remain unchanged, suggesting that firms retain their technical capabilities; (iv) affected firms adapt by increasing exports to familiar markets but fail to expand into new markets or boost domestic sales. These results highlight the resilience of exporting firms but also underscore the persistent difficulties in substituting a major trade partner. |
| Keywords: | Exports, Firm Performance, Manufacturing, Trade Collapse, Total Factor Productivity |
| JEL: | F13 F14 F61 O12 D22 D24 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:col:000089:021687 |
| By: | Arenas Díaz, Guillermo (Università Cattolica del Sacro Cuore); Piva, Mariacristina (Università Cattolica del Sacro Cuore); Vivarelli, Marco (Università Cattolica del Sacro Cuore) |
| Abstract: | This study investigates the relationship between Artificial Intelligence (AI) and innovation inputs in Spanish manufacturing firms. While AI is increasingly recognized as a driver of productivity and economic growth, its role in shaping firms’ innovation strategies remains underexplored. Using firm-level data, our analysis focuses on whether AI complements innovation inputs - specifically R&D and Embodied Technological Change (ETC) - and whether AI can be considered as a Method of Invention, able to trigger subsequent innovation investments. Results show a positive association between AI adoption and both internal R&D and ETC, in a static and a dynamic framework. Furtheremore, empirical evidence also highlights heterogeneity, with important peculiarities affecting large vs small firms and high-tech vs low-tech companies. These findings suggest that AI may act as both a complement and a catalyst, depending on firm characteristics. |
| Keywords: | innovation inputs, R&D, method of invention, Artificial Intelligence, innovative complementarities |
| JEL: | O31 O32 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18175 |
| By: | Killian Thibaud Chary (UMR ISEM - Institut des Sciences de l'Evolution de Montpellier - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EPHE - École Pratique des Hautes Études - PSL - Université Paris Sciences et Lettres - Institut de recherche pour le développement [IRD] : UR226 - CNRS - Centre National de la Recherche Scientifique - UM - Université de Montpellier); Emma Soulé (INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Souhil Harchaoui (INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | Circularity is a powerful strategy for decreasing the use of non-renewable resources, nutrient pollution, and greenhouse gas emissions from food systems. To enhance food system sustainability, circularity and its trade-offs should be considered along with productivity, efficiency, or self-sufficiency strategies. |
| Keywords: | Agricultural policies, Nutrient cycling, Environmental impacts, Crop-livestock integration, Circular food systems, systèmes alimentaires, impact sur l'environnement, systèmes agroalimentaires, autosuffisance, agroécologie, diversification, système de production, réglementation |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05298391 |
| By: | Andrew Foerster; Andreas Hornstein; Pierre-Daniel G. Sarte; Mark W. Watson |
| Abstract: | We explore the evolving significance of different production sectors within the U.S. economy since World War II and provide methods for estimating and forecasting these shifts. Using a compositional accounting approach, we find that the well-documented transition from goods to services is primarily driven by two compositional changes: 1) the rise of Intellectual Property Products (IPP) as an input producer, replacing Durable Goods almost one-for-one in terms of input shares in virtually all sectors; and 2) a shift in consumer spending from Nondurable Goods to Services. A structural model replicating these shifts reveals that the rise of IPP at the expense of Durable Goods is largely explained by increases in the efficiency of IPP inputs used in production: input-biased technical change. Trend variations in sectoral total factor productivity, and their attendant effects on relative prices and income, are the main driver of evolving consumption patterns. Both reduced-form and structural forecasts project these trends to continue over the next two decades, albeit at lower rates, indicating a slower pace of structural change. |
| Keywords: | production and investment |
| JEL: | E17 E23 E27 |
| Date: | 2025–10–03 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedrwp:101929 |
| By: | Brändle, Thomas; Colombier, Carsten; Lerch, Benjamin |
| Abstract: | Healthcare expenditure growth is a key economic policy issue threatening the sustainability of public finances in advanced economies. This paper examines the determinants of healthcare expenditure in Switzerland using a time-series analysis for the period 1960-2022. Applying a dynamic OLS and an outlier-robust modified generalized maximum likelihood (MM) estimation approach, we find that income growth, population ageing, and Baumol’s cost disease have all contributed to increasing total and public healthcare expenditure. The analysis suggests an income elasticity between 0.9 and 1.3, accounting for roughly half of the secular increase in healthcare expenditure. Our estimations also suggest a decrease in income elasticity over time. We find that population ageing has contributed by around 15% to the growth in healthcare expenditure. Income growth, demographic shifts, medical progress, slow productivity growth and labor shortages in healthcare are poised to intensify spending pressures in the years ahead, with implications both for total and public healthcare expenditure. Our results substantiate the policy debate on the determinants of healthcare expenditure, provide a tailored evidence basis for the healthcare expenditure projection framework for Switzerland and underscore the need for comprehensive reforms in the health sector to contain expenditure growth. |
| Keywords: | Health expenditure, public finances, income elasticity, population ageing, Baumol’s cost disease |
| JEL: | H51 I18 J11 C22 |
| Date: | 2025–06–30 |
| URL: | https://d.repec.org/n?u=RePEc:bsl:wpaper:2025/06 |
| By: | Bertoni, Fabio; Colombo, Massimo G.; Quas, Anita |
| Abstract: | This paper assesses the impact of the COSME Loan Guarantee Facility (LGF) on SMEs in Belgium, France, and Italy between 2015 and 2023. Using advanced econometric methods, we compare SMEs that received a guarantee with a control group of similar companies and find that beneficiaries experienced higher growth in total assets, sales, employment, and both tangible and intangible fixed assets three years after the signature year. The analysis also shows that guaranteed loans improve firms' survival prospects, without adverse long-term effects on productivity. Moreover the study highlights that the effects tend to be larger for smaller and younger firms. This study is part of our ongoing effort to design and implement a comprehensive Impact Assessment Framework. Ex-post evaluations, such as this report, provide essential evidence for shaping future support measures and improving the accuracy of impact forecasts. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:eifwps:328250 |
| By: | Erick Rangel; Marco A. Esteban Aguirre; Irving Llamosas-Rosas |
| Abstract: | We apply the synthetic control method to analyze the initial effects of nearshoring on labor outcomes in Mexico's manufacturing sector from July 2020 to June 2023. Our methodology compares jobs, earnings, and productivity among industry groups more likely to be affected by nearshoring, as identified through a propensity index, with a counterfactual constructed from less likely affected industries. Our results indicate that nearshoring is potentially generating early gains in manufacturing jobs but has not led to improvements in earnings. Furthermore, we do not observe a consistent impact on productivity, although some specifications suggest a modest positive effect in industries with a higher nearshoring propensity. While nearshoring effects may take longer to materialize, our findings highlight its initial implications for the Mexican manufacturing sector. |
| Keywords: | Nearshoring;Manufacturing Sector;Jobs;Earnings;Productivity |
| JEL: | J01 J40 F61 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:bdm:wpaper:2025-16 |
| By: | Tan Ke Wen, Carmen |
| Abstract: | This study is an analysis that attempts to investigate the determinants of operation efficiency throughout the context of National Industrialization Co. Analysing the impact of internal, external, and combined variables of National Industrialization Co. are the aim of this research project. The annual reports from 2013 to 2023 are examined as part of the research. The raw data for this investigation were analysed using a multiple linear regression model. Throughout this study, a results indicate that the four of all internal and external variables have a significant effect on the company's operation efficiency, which are Return on Equity (ROE), Cash Ratio (Cash), and Foreign Direct Investment (FDI). Additionally, the study provides valuable insights into the company's risk management practices, offering recommendations to enhance risk mitigation strategies, thereby ensuring the company's long-term financial stability and regulatory compliance. |
| Keywords: | National Industrialization Co, . risk determinants, regression analysis, internal factors, macroeconomics |
| JEL: | G32 L65 |
| Date: | 2025–01–09 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:123238 |
| By: | Jing Li; Bowei Guo; Xinqi Xie; Kuo-Ping Chang |
| Abstract: | The empirical results have shown that firstly, with one-week holding period and reinvesting, for SSE Composite Index stocks, the highest p-ratio investment strategy produces the largest annualized rate of return; and for NYSE Composite Index stocks, all the three strategies with both one-week and one-month periods generate negative returns. Secondly, with non-reinvesting, for SSE Composite Index stocks, the highest p-ratio strategy with one-week holding period yields the largest annualized rate of return; and for NYSE Composite stocks, the one-week EEF strategy produces a medium annualized return. Thirdly, under the one-week EEF investment strategy, for NYSE Composite Index stocks, the right frontier yields a higher annualized return, but for SSE Composite Index stocks, the left frontier (stocks on the empirical efficient frontier) yields a higher annualized return than the right frontier. Fourthly, for NYSE Composite Index stocks, there is a positive linear relationship between monthly return and the p-index, but no such relationship is evident for SSE Composite Index stocks. Fifthly, for NYSE Composite Index stocks, the traditional five-factor model performs poorly, and adding the p-index as a sixth factor provides incremental information. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.11074 |
| By: | Mauri Kotamaki (Turku School of Economics, University of Turku, Finland) |
| Abstract: | This paper estimates the causal effect of financial constraints on the short-term performance of Finnish SMEs using survey data from 2016-2024 and propensity score matching (PSM). We examine six outcomes: turnover, employment, investment, profitability, solvency, and innovation, and report effects on both odds and probability scales. Financial constraints significantly increase the likelihood of adverse outcomes: constrained firms face 10-30\% higher odds of reporting deterioration in core indicators, with the largest effects on solvency (29\% higher odds) and profitability, followed by investment and turnover; employment effects are smaller, and innovation effects modest. Marginal effects indicate up to a 4 percentage point reduction in the probability of improvement for key outcomes. Results are robust to multiple-testing adjustments, and alternative specifications. Heterogeneity analysis reveals that the effects vary by firm size, pointing to a dual mechanism: turnover and profitability effects are strongest for micro and small firms, reflecting immediate liquidity stress, while employment and investment effects intensify with firm size, suggesting real adjustments (growth obstacles) are more pronounced in mid-sized SMEs. Policy implications and directions for future research are discussed. |
| Keywords: | credit constraints, financing, impact analysis, propensity score matching |
| JEL: | G32 D22 L25 C21 O16 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:tkk:dpaper:dp172 |