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on Efficiency and Productivity |
| By: | Simar, Léopold (Université catholique de Louvain, LIDAM/ISBA, Belgium); Wilson, Paul (Clemson University) |
| Abstract: | Production theory is based on an economic model where we define the production set, i.e. the set of the combinations of inputs and outputs that are technically feasible. The efficiency of a particular unit is measured by its distance to the efficient frontier of the production set, based on a selected direction. Nonparametric models are particularly appealing because they do not rely on restrictive assumptions about the shape of the efficient frontier nor on the processes that may give rise to inefficiencies. Since these quantities are typically unknown, they must be estimated from a sample of observed units. The most widely used non-parametric approaches are based on envelopment estimators such as Data Envelopment Analysis (DEA) or Free Disposal Hull (FDH), making the derived measures of efficiency for a given unit dependent on these envelopment estimators. In recent decades, substantial results have been derived regarding the statistical properties of these non-parametric estimators. These advancements facilitate statistical inference regarding the efficiency scores of individual units acrossdifferent contexts or efficiency comparison between groups of units, as well as testing procedures concerning the shape of the attainable set (whether convex or non-convex), or assumptions about returns to scale. It is shown how crucial the assumptions made on the DGP are, incorrect assumptions may lead to inconsistent estimators and wrong inference. These results have now been extended to dynamic settings, including inference on Malmquist Productivity Indices (and other well-known productivity indices) and their components. In this paper, we provide a comprehensive up-to-date survey of various approaches. |
| Keywords: | Production Theory ; Nonparametric estimation ; Data envelopment analysis ; Conditional frontiers |
| JEL: | C1 C14 C13 D24 O47 |
| Date: | 2026–02–01 |
| URL: | https://d.repec.org/n?u=RePEc:aiz:louvad:2026002 |
| By: | Donghyun Suh; Samil Oh |
| Abstract: | Using a representative survey of Korean workers, we provide evidence on the adoption of Generative AI (GenAI) and how GenAI reallocates time at work. We find that 51.8\% of workers use GenAI for work and GenAI reduces working time by 3.8\%. However, these gains may not materialize in aggregate productivity statistics yet: the correlation between time savings and output changes is near zero. We show this disconnect arises because workers capture efficiency gains primarily as on-the-job leisure, rather than increasing their output. These findings suggest that standard productivity measures may understate AI's impact by missing non-pecuniary welfare channels. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.12695 |
| By: | Hasan Murat ErtuÄŸrul (Anadolu University); Ömer Tugsal Doruk (Adana Alparslan TürkeÅŸ Science and Technology University); Ömer Faruk Tekdogan (University of Ankara) |
| Abstract: | This study investigates the impact of the informal sector on firm performance for over 10.000 nonfinancial firms operating in the 8 MENA countries covering 1997-2020 periods. Using a Panel Dynamic Generalized Method of Moments (GMM), we find that the effect of the informal sector on firm performance is negative. These estimates seem strong according to robustness check. We also do the analysis for SMEs and non-SMEs and find that SMEs are more sensitive to the informal sector. In terms of its findings, the study sheds new light on the MENA region by analyzing the relationship between informal economy and firm performance in a highly heterogeneous manner. |
| Date: | 2025–12–17 |
| URL: | https://d.repec.org/n?u=RePEc:erg:wpaper:1814 |
| By: | Nikiforos, Michalis; Missos, Vlassis; Pierros, Christos; Rodousakis, Nikolaos |
| Abstract: | This paper investigates the structural transformation of the Greek economy over the past fifteen years, focusing on the increasing dominance of the Accommodation and Food Service Activities (AFSA) sector in the aftermath of austerity and structural reforms. Despite promises of productivity gains through labor market and product market reforms, the Greek economy has experienced a sharp decline in labor productivity and a significant reallocation of employment towards low-productivity sectors, especially AFSA, reminiscent of a Lewis-type dual sector economy. Using a simple Panel-VAR model we find that declining aggregate demand and real wages were key drivers of this productivity collapse. Our findings support theories of technological change that emphasize output growth and the cost of labor as fundamental determinants of productivity growth. |
| Keywords: | Greece; austerity; structural reforms; structural transformations; technical change |
| JEL: | E60 H30 J38 J50 O10 O30 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:137246 |
| By: | Gabriel M. Ahlfeldt; Stephan Heblich; Tobias Seidel; Fan Yin |
| Abstract: | We construct a new micro-geographic commercial rent index for Germany to study the capitalization of agglomeration economies into floor space prices. In large local labor markets, commercial rents decline by -17% per kilometer from the central business district, compared to 13% for residential rents, reflecting stronger agglomeration benefits at the center. Commercial rents in central business districts increase with local labor market size at an elasticity of 15%, implying that wage responses capture only about half of the agglomeration effect on total factor productivity. |
| Keywords: | Agglomeration, commercial rent, prime locations, spatial equilibrium, total factor productivity |
| JEL: | L2 R3 |
| Date: | 2026–02–11 |
| URL: | https://d.repec.org/n?u=RePEc:bdp:dpaper:0091 |
| By: | Cazals, Catherine (Toulouse School of Economics); Florens, Jean-Pierre (Toulouse School of Economics); Simar, Léopold (Université catholique de Louvain, LIDAM/ISBA, Belgium) |
| Abstract: | In production theory, a lot of attention has been paid in the literature to the analysis of the effect of environmental variables on the efficiency of firms. The usual and natural way to investigate this issue is to consider conditional frontier models. For nonparametric approaches, this can create serious problems if the number of these potential environmental factors increases, exacerbating the curse of dimensionality characteristic of nonparametric models. In this paper, to address this issue, we investigate whether Single Index Models (SIM) could be used for modeling the effect of these variables on the production process. We propose a test for the SIM hypothesis and analyse the asymptotic properties. If the SIM model is not rejected, we obtain better rates of convergence of the conditional efficiency estimates. The paper investigates, through some Monte-Carlo experiments, the finite sample properties of the proposed test and the properties of the resulting estimates of the SIM when it is not rejected. We illustrate the method with a real data set from the French national postal operator in charge of universal service. |
| Keywords: | Nonparametric conditional frontier ; Single-Index ; Robust frontier ; Environmental variables |
| JEL: | C10 C14 C51 D22 |
| Date: | 2025–11–28 |
| URL: | https://d.repec.org/n?u=RePEc:aiz:louvad:2025022 |
| By: | Victor Rangel |
| Abstract: | This paper quantifies, within a short-run structural model with predetermined capital, the immediate effects of imposing a cap on formal working hours that reduces the weekly workweek from 44 to 36 hours. The central object is the total factor productivity required to preserve GDP at its baseline level, A_req, defined as the multiplicative factor applied to A_t that equates output under the policy to output in the baseline. In the baseline simulation, the 44 -> 36 transition implies A_req ~ 8.5% |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.03884 |
| By: | Wiem El Abed (USO - جامعة سوسة = Université de Sousse = University of Sousse); Mongi Lassoued (USO - جامعة سوسة = Université de Sousse = University of Sousse) |
| Abstract: | This study analyzes the interaction between institutional quality and FDI dynamics in driving economic growth across 16 MENA countries over the period 2011-2024. Using the Generalized Method of Moments (GMM) developed by Arellano and Bond (1991), it addresses the endogeneity between growth, FDI, and institutional factors. The results suggest that FDI positively contributes to growth, but its impact largely depends on the quality of institutions. Countries with strong governance and sound regulatory frameworks benefit more from technology transfer and productivity spillovers generated by FDI. The study therefore highlights that institutional improvement is a key lever for maximizing the benefits of foreign investment and fostering sustainable growth in the MENA region. |
| Keywords: | FDI, GMM method, Institutional quality, Economic growth |
| Date: | 2026–01–27 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05491999 |
| By: | Sandra Batten; Stephen Millard |
| Abstract: | In this paper, we use a DGE model to examine the effect of the move to net zero in the United Kingdom on productivity. One argument is that the transition is likely to be productivity–reducing, as it will involve a move from more to less efficient means of producing. Alternatively, it could be argued that the transition will be productivity–enhancing, as the capital investment required to bring about this move leads to a rise in productivity, both within the specific "greening" industries and more generally via productivity spillovers to the rest of the economy. Our model enables us to examine how this potential trade–off varies depending on whether we look at the short, medium or long run. We find that the introduction of a carbon tax, applied to encourage the move towards net zero, reduced GDP and total hours worked, but since total hours fell by more than GDP, increased productivity. As electricity becomes more substitutable for petrol and gas, the effect on productivity becomes more positive as GDP recovers while total hours remain permanently lower than initially. Finally, our results suggest that unless investment in green technology leads to significant technological gains elsewhere, it is unlikely that the move to net zero will have a large effect on productivity growth above and beyond the direct effect resulting from the capital deepening that will be associated with it. |
| Keywords: | Climate Change, Dynamic General Equilibrium, Carbon Tax, Climate policy, Energy, Renewable energy |
| JEL: | Q28 Q38 Q43 Q48 Q58 E32 |
| URL: | https://d.repec.org/n?u=RePEc:nsr:niesrd:575 |
| By: | Tatsuru Kikuchi |
| Abstract: | This paper evaluates the causal impact of Generative Artificial Intelligence (GenAI) adoption on productivity and systemic risk in the U.S. banking sector. Using a novel dataset linking SEC 10-Q filings to Federal Reserve regulatory data for 809 financial institutions over 2018--2025, we employ two complementary identification strategies: Dynamic Spatial Durbin Models (DSDM) to capture network spillovers and Synthetic Difference-in-Differences (SDID) for causal inference using the November 2022 ChatGPT release as an exogenous shock. Our findings reveal a striking ``Productivity Paradox'': while DSDM estimates show that AI-adopting banks are high performers ($\beta > 0$), the causal SDID analysis documents a significant ``Implementation Tax'' -- adopting banks experience a 428-basis-point decline in ROE as they absorb GenAI integration costs. This tax falls disproportionately on smaller institutions, with bottom-quartile banks suffering a 517-basis-point ROE decline compared to 129 basis points for larger banks, suggesting that economies of scale provide significant advantages in AI implementation. Most critically, our DSDM analysis reveals significant positive spillovers ($\theta = 0.161$ for ROA, $p |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.02607 |
| By: | Cagin Keskin |
| Abstract: | Horizontal expansion through an expanding product portfolio lies at the core of modern endogenous growth literature. However, evidence remains limited on how diversification across industries influences a firm's trade-off between generating social surplus and maximizing private returns. To investigate this, I categorize intangible assets by their spillovers: transferable intangibles (patents, software) generate social surplus, whereas embedded intangibles (organizational capital, brand value) primarily yield private returns. I document that diversified firms reallocate investment toward embedded intangibles, while at the same time having lower markups and productivity, as well as less competitive threats. Motivated by this evidence, I extend a canonical endogenous-growth framework to endogenize firms'allocations between transferable and embedded intangibles, allowing for both horizontal and vertical expansion. A key prediction of the model is that embedded intangibles are freely mobile across a firm's production lines; therefore, this mobility generates increasing returns to scale as the firm diversifies, which also raises entry barriers for competitors and decreases the social surplus, rather than promoting long-run growth. Thus, a shift in innovative effort ultimately sacrifices economy-wide growth for firm-level market advantages, and quantitative analysis indicates that size-dependent taxes can substantially improve welfare. |
| Keywords: | Schumpeterian growth, step-by-step innovation, intangibles, firm dynamics, span of control |
| JEL: | E22 O31 O32 O33 O34 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:cer:papers:wp811 |
| By: | Abrigo, Michael R.M.; Estopace, Katha Ma-i M.; Lingatong, Edmar E.; Relos, Charlotte Marjorie L. |
| Abstract: | The study examines how linguistic mismatch between students’ home languages and the language of instruction shapes learning productivity in linguistically diverse societies. A framework is developed in which linguistic distance acts as a multiplicative tax on educational production, and welfare-theoretic conditions for optimal language choice are derived. The framework is applied to Philippine elementary schools during the 2009–2024 mother tongue-based multilingual education (MTB-MLE) reform, exploiting policy-induced variation in linguistic alignment using difference-in-differences and shift-share instrumental variables designs. The Foster-Greer-Thorbecke family of deprivation measures, traditionally used to quantify income poverty, is extended to network settings in order to capture spatial variations in the degree of linguistic mismatch and estimate substantial school-based linguistic deprivation under a counterfactual pre-reform bilingual language regime, concentrated in non-Tagalog-predominant regions. Each unit of mismatch is found to reduce achievement by 35-57 percent of potential, depending on the curricular subject, yielding productivity losses comparable in magnitude to canonical estimates of spatial misallocation in firm production. Under a counterfactual pre-reform bilingual regime, an average student would have operated at 27–45 percent below learning potential, with losses concentrated in linguistically diverse regions. MTB-MLE reduced these losses by roughly two-thirds nationally, though systematic deviations from optimal language choice leave substantial efficiency gains unrealized. The reform also increased student continuation rates by 9-12 percentage points but temporarily strained classroom capacity, reflecting general-equilibrium resource pressures when demand-side constraints are relaxed. Overall, the results demonstrate that language policy is a first-order determinant of educational efficiency in multilingual settings and that measuring the quality of linguistic matching, rather than policy adoption alone, is central to evaluating language-in-education reforms. Comments to this paper are welcome within 60 days from the date of posting. Email publications@pids.gov.ph. |
| Keywords: | Language policy, multilingual education, linguistic distance, allocative efficiency, Philippines, policy evaluation, EDCOM 2 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:phd:dpaper:dp_2025-41 |