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on Efficiency and Productivity |
| By: | Tim Obermeier; Andreas Teichgraeber |
| Abstract: | Fast productivity growth in the UK car industry led to staff in the sector earning about 37% more than the average manufacturing employee by the 2010s. But Andreas Teichgraeber and Tim Obermeier show that while wages went up, the share of the productivity gains going to workers declined. |
| Keywords: | Productivity, Manufacturing, wages, firms, market performance, automotive |
| Date: | 2025–02–20 |
| URL: | https://d.repec.org/n?u=RePEc:cep:cepcnp:699 |
| By: | Norris Keiller, Agnes; Obermeier, Tim; Teichgraeber, Andreas; Van Reenen, John |
| Abstract: | When labour market competition is imperfect, positive industry (and firm) productivity shocks can be passed through to workers in the form of higher wages. We document how the UK auto industry, following a period of decline, experienced a four-decade-long productivity boom. There was a thirteen-fold increase in real output per worker between 1980 and 2018, compared to a four-fold increase in manufacturing. Greater foreign ownership, tougher competition and improved industrial relations all likely played a role. The greater use of intermediate inputs (outsourcing) and growing capital intensity account for most of this growth, but we estimate that TFP still grew three times as fast in the auto industry than the rest of manufacturing. Examining whether this productivity increase has been shared with employees, we find that auto workers experienced far stronger hourly wage growth than workers in the rest of manufacturing. After controlling for individual fixed effects, the auto wage premium relative to the rest of manufacturing doubled from 8% in the 1980s to 17% in the 2010s. Interpreted through the lens of a rent sharing model, we estimate that most of the wage increase (63% in the baseline case) can be accounted for by the auto productivity boom. In contrast, the bargaining power of UK auto workers seems to have fallen. If worker power had held up at the 1980s level, the wage premium would have been about 38% higher in the 2010s. |
| Keywords: | wages; firms; market performance; manufacturing; automotive |
| JEL: | J3 L1 L6 |
| Date: | 2024–07–03 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:126764 |
| By: | Berlingieri, Giuseppe; Boeri, Filippo; Lashkari, Danial; Vogel, Jonathan |
| Abstract: | We study capital-skill complementarity in a multi-sector framework featuring firm-specific, multi-factor production functions and allowing for firm-specific factor-price wedges. We characterize the elasticity of the skill premium to the price of capital equipment in terms of firm-level elasticities of substitution across factors, elasticities of substitution across firms and sectors, and factor intensities. Using French data, we provide credible identification of these firm-level elasticities. Combining these elements we offer the first identification of aggregate capital-skill complementarity that allows for arbitrary trends in the unobservable skill-bias of productivity at the firm, industry, and aggregate levels. We find an economically and statistically significant degree of aggregate capital-skill complementarity, but this force alone is insufficient to generate the full increase in the relative demand for high-skilled workers observed in the data. There is a substantial role for skill-augmenting technical change not embodied in capital equipment. |
| Keywords: | capital-skill complementarity; capital equipment; income inequality; skill premium; cresh |
| JEL: | E10 E23 E25 J30 |
| Date: | 2024–09–25 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:126751 |
| By: | Cirera, Xavier; Vargas Da Cruz, Marcio Jose; Soares Martins Neto, Antonio; Lee, Kyungmin; Gomes Nogueira, Caroline |
| Abstract: | This paper explores new firm-level data to examine the gender gap in technology adoption and the associated effect on firm performance. The data show a small difference in technology sophistication between firms managed by women and those managed by men, but there are larger differences in terms of labor productivity. Firms with female top managers are just as likely to adopt the most sophisticated technologies for general business functions that are common across all firms except for enterprise resource planning. However, firms managed by women adopt advanced technologies less frequently for sector-specific business functions. The study also finds that firms with higher technology sophistication tend to have higher productivity and the returns to the use of more sophisticated technologies are larger in businesses managed by women, which helps to narrow the productivity gap between firms managed by women and those managed by men. |
| Date: | 2024–05–15 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10771 |
| By: | Patino Pena, Fausto Andres; Ferro, Esteban |
| Abstract: | This paper examines the role of firm dynamics in aggregate total factor productivity, job flows, and wage inequality in Ecuador. Utilizing a comprehensive employer-employee dataset, the paper documents firm dynamics and job flow patterns that are consistent with the presence of market distortions. Also, the paper identifies factor misallocation as the main contributor to Ecuador's total factor productivity deceleration. Given these trends, the paper explores allocative inefficiency drivers through firm- and industry-level regressions. Firms in the top productivity quintile face distortive non-wage labor costs that are 3.7 times higher than the bottom quintile, after controlling for firm size and age. The findings also provide evidence of credit misallocation across firms. Additionally, industries with higher job mobility, credit access, and competition and lower non-wage labor costs, minimum wage incidence, and zombie firms demonstrate higher allocative efficiency. Moreover, worker-level regressions indicate that misallocation drivers explain up to 41 percent of wage inequality, with non-wage labor costs and product market frictions as distortions driving this inequality. |
| Date: | 2024–03–27 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10739 |
| By: | Jacob Moscona; Karthik A. Sastry |
| Abstract: | An influential explanation for global productivity differences is that frontier technologies are adapted to the high-income countries that develop them and "inappropriate" elsewhere. We study this hypothesis in agriculture using data on novel plant varieties, patents, output, and the global range of crop pests and pathogens. Innovation focuses on the environmental conditions of technology leaders, and ecological mismatch with these markets reduces technology transfer and production. Combined with a model, our estimates imply that inappropriate technology explains 15-20% of cross-country agricultural productivity differences and re-shapes the potential consequences of innovation policy, the rise of new technology leaders, and environmental change. |
| JEL: | O3 O33 O4 O44 Q16 Q56 Q57 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33500 |
| By: | Lei Nie (Cooperative Innovation Center for Transition of Resource-based Economies and Research Institute of Resource-based Economic Transformation and Development, Shanxi University of Finance and Economics, Taiyuan, China); Zhenzhen Ren (Research Institute of Resource-based Economic Transformation and Development, Shanxi University of Finance and Economics, Taiyuan, China); Yanrui Wu (Department of Economics, University of Western Australia, Perth, Australia); Qizhou Luo (Department of Economics, University of Nevada, Reno, USA) |
| Abstract: | This study aims to investigate the repercussions of urban industrial land misallocation on green total factor productivity within the context of China’s Yellow River Basin regions. Utilizing data from 99 prefecture-level cities over the period from 2007 to 2020, the analysis reveals that the misallocation of urban industrial land exhibits regional variations and exerts a significant and persistent negative influence on green total factor productivity, with notable regional disparities. Further analysis shows the mechanism of this effect is the obstacle to urban innovation due to industrial land misallocation. In addition, education expenditure plays a moderating role both directly and indirectly. These findings imply the need to continuously improve the performance evaluation and financial system of local governments, reduce government intervention and make use of the market mechanism in the allocation of urban industrial land. |
| Keywords: | industrial land misallocation, green total factor productivity, moderated mediation model, China |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:uwa:wpaper:24-05 |
| By: | Rami Mikko Ahmed Galal |
| Abstract: | Economic zone programs are generally pursued to improve firms' performance within discrete areas by removing the constraints firms face. Whether or not they succeed in doing so is an empirical question. This paper capitalizes on a unique survey of firms within and outside zones in South Asia to assess the effects of zone programs on firms’ performance in exports, investment, employment, and productivity. Adopting a propensity score matching approach and district-level fixed effects, the paper explores four questions: whether zones support firm performance; whether the type of zone makes a difference, which kinds of public support services matter more, and whether firms inside zones grow faster. The results show that (i) being inside a zone positively affects foreign direct investment and employment, (ii) the effects across zone types are mixed, (iii) infrastructure and trade facilitation play a greater role in firm performance than fiscal incentives and governance facilities, and (iv) firms inside zones grow faster. |
| Date: | 2024–05–21 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10781 |
| By: | Simbeye, Laban; Lungu, Eliya; Kumwenda, Andreya; Banda, Edna; Msoni, Jonathan; Kuo, Ryan Chia |
| Abstract: | Zambia’s private sector must deliver quality jobs at scale to keep up with its expanding working age population, contribute to economic transformation, and reduce poverty. This entails both the creation of high-quality jobs and productivity improvement among existing jobs and firms. This paper analyzes the dynamics of formal firms to identify the drivers and barriers to productivity, formal employment, and formal wage growth in Zambia. Leveraging firm and worker administrative tax data from Zambia, the paper decomposes labor productivity and wage growth among formal firms and workers in Zambia into within-firm, between-firm, inter-sectoral, and dynamic components. The findings show that the aggregate labor productivity of formal firms declined over 2014–21, driven by secular within-firm declines in the non-mining industry and service sectors. By contrast, labor productivity grew in agriculture and remained flat in mining over the same period. Real wage trends for formal workers have mostly mirrored labor productivity dynamics, declining 40-50 percent across non-agriculture sectors but growing slightly in agriculture, largely driven by within-firm shifts rather than between-firm or between-sector dynamics. The declines in labor productivity and wages reflect business environment challenges related to access to finance and electricity, as well as burdensome formal compliance requirements and competition with the informal sector. Within-firm labor productivity challenges also reflect low skills and capacity—including low technology adoption—among both firms and workers. |
| Date: | 2024–04–18 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10756 |
| By: | Aguilar Luna, Luis Alejandro; Winkler, Deborah Elisabeth |
| Abstract: | This paper examines the relationship between trade and job quality, using productivity and wage rate data for export and non-export activities in a sample of 60 countries across all income levels and 45 sectors spanning the whole economy over 1995–2019. First, the analysis finds that workers involved in export activities are more productive and better paid than those in non-export activities. While the productivity premium for export activities is confirmed in low- and middle-income countries, there is no wage rate premium. Second, this study finds a positive relationship between exports and labor productivity at the country-sector level, which can be attributed to productivity gains within export activities as well as spillovers to non-export activities. Countries’ specialization in global value chains and sectors also matters for the relationship between exports and job quality, with manufacturing, agriculture, and business services showing stronger associations. The link between exports and the wage rate is smaller than for productivity. Finally, productivity and wage rate growth decompositions suggest that growth within rather than between activities was the driving force. Within export activities, productivity and wage increases were dominated by within-sector growth, although labor movement toward more productive sectors also matters in low- and middle-income countries. |
| Date: | 2024–03–26 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10737 |
| By: | Cusolito, Ana Paula; Fattal Jaef, Roberto N.; Mare, Davide Salvatore; Singh, Akshat Vikram |
| Abstract: | This paper leverages the novel methodology by Whited and Zhao (2021) to identify financial distortions and applies it to a sample of 24 European countries. The analyses reveal that less developed economies face more severe financial misallocation. Distortions in the allocation of financial resources raise the relative cost of finance for younger, smaller, and more productive firms. Counterfactual analysis indicates that alleviating financial distortions could boost aggregate productivity by approximately 30-70 percent. On average, 75 percent of these gains across countries result from better access to finance, with the remainder from optimizing the debt-to-equity ratio. The paper also quantifies the link between financial misallocation and real-input allocative inefficiency, showing that reducing financial misallocation from the median to the 25th percentile of the cross-industry distribution can increase aggregate productivity by an average of 5.2 percent. The effect is larger, at 6.4 percent, for industries heavily reliant on external finance. |
| Date: | 2024–06–20 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10811 |
| By: | Estrin, Saul; Herrmann, Andrea; Levesque, Moren; Mickiewicz, Tomasz; Sanders, Mark |
| Abstract: | We present a Schumpeterian growth model with new venture creation, under uncertainty, which explains the tradeoff between speed-to-breakeven, revenue-at-breakeven and relates this to the level of innovation. We then explore the tradeoffs between these outcomes empirically in a unique sample of 331 information and communication technology (ICT) ventures using a multi-input, multi-output stochastic frontier model. We estimate the contribution of financial capital and labor input to the outcomes and the tradeoffs between them, as well as address heterogeneity across ventures. We find that more innovative (and therefore more uncertain) ventures have lower speed-to-breakeven and/or lower revenue-at-breakeven. Moreover, for all innovativeness levels, new ventures face a tradeoff between speed-to-breakeven and revenue-at-breakeven. Our results suggest that it is the availability of proprietary resources (founder equity and labor) that helps ventures overcome bottlenecks in the innovation process, and we propose a line of research to explain the (large) unexplained variation in venture creation efficiency. |
| Keywords: | entrepreneurship; innovation; new venture creation; proprietary resources; stochastic frontier analysis; schumpeterian growth model |
| JEL: | O31 L29 |
| Date: | 2024–11–15 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:126789 |
| By: | Fujiy, Brian C.; Ghose, Devaki; Khanna, Gaurav |
| Abstract: | This paper provides one of the first estimates of elasticities of substitution across suppliers within the same product. This paper estimates these elasticities using new real-time administrative tax data on firm-to-firm transactions, with product-level prices and quantities, leveraging geographic and temporal variation from India's Covid-19 lockdowns to derive causal estimates of these elasticities. Suppliers are highly complementary even at this granular level, with an estimated elasticity of 0.55. The paper shows that the quality of institutions, input specificity, inventories, and time horizons explain the low elasticity. These firm-level complementarities amplify the propagation of negative shocks through production networks, and make connected firms important for shock propagation. In policy counterfactuals, the paper shows that given these complementarities, allowing more connected firms to operate in the face of shocks mitigates output declines non-linearly with the size of the productivity shock. |
| Date: | 2024–05–22 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10782 |
| By: | Casacuberta, Carlos; Gandelman, Néstor |
| Abstract: | This paper examines the relationship between wages and market power at the firm level. We derive firm-specific measures of labor market power and present a natural decomposition of wage changes into shifts in labor market power and labor productivity. Our findings indicate that 50-60 percent of the variation in nominal wages is attributable to price changes, while the remaining portion, reflecting changes in real wages, is explained mainly by changes in market power and, to a lesser extent, by changes in labor productivity. Moreover, we show that firms with greater market power tend to pay higher wages, suggesting rent-sharing between employers and employees, at the cost of higher prices for consumers. |
| Keywords: | Price Markups;Labor market power |
| JEL: | L10 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:idb:brikps:13987 |
| By: | Leland D. Crane; Michael Green; Paul E. Soto |
| Abstract: | Artificial Intelligence (AI) may be poised to raise productivity across various domains, including writing (Noy and Zhang 2023), programming (Peng et al. 2023), and research and development (Toner-Rodgers 2024; Korinek 2023). However, understanding the extent to which AI—and generative AI in particular—has been adopted as part of the production process remains an open question. This note reviews the extant surveys on AI adoption at both the employee and firm levels. |
| Date: | 2025–02–05 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfn:2025-02-05 |
| By: | Sanchez Navarro, Dennis |
| Abstract: | This paper studies the performance differentials between privately-owned enterprises and businesses of the state. Businesses of the State (BOS) are firms with 10 percent or more direct or indirect state participation. By analyzing firm-level data across 16 European countries between 2011 and 2020, the paper finds evidence that state ownership matters for operational and financial performance and sheds light on how and when it matters. The analysis disentangles the multiple forms of state participation and its effects on firms’ performance by exploring the heterogeneity across sector type, levels of state participation, and degree of separation (direct versus indirect shareholding). It also analyzes the early response of businesses of the state to the COVID-19 shock. The results suggest that businesses of the state underperform in terms of labor productivity, profitability, and return on investments, although the effects are heterogeneous depending on the level of state participation, degree of separation, and type of sector. Businesses of the state appear to be more financially leveraged vis-à-vis their private counterparts, suggesting potential soft budget constraints. Wider differentials in profitability and return on investments are evidenced when the state operates in fully competitive sectors that are viable for private participation, underscoring the opportunity costs of state ownership in those sectors. Furthermore, the findings show that mixed ownership with the private sector can drive better results when compared to fully owned businesses of the state. Similarly, a higher degree of separation from the state seems to improve performance, highlighting the role of corporate governance and ownership reforms to foster independence. Finally, businesses of the state demonstrated greater resilience in preserving jobs in the short term during the COVID-19 pandemic in 2020. |
| Date: | 2024–06–24 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10820 |
| By: | Barba Navaretti, Giorgio; Bugamelli, Matteo; Forlani, Emanuele; Ottaviano, Gianmarco I. P. |
| Abstract: | Understanding producers' selection into exporting and its consequences for micro-founded gravity estimation calls for an in-depth analysis of the interplay between aggregate exports and the distribution of producers' productivity. Yet, knowledge about such interplay is still rather limited from both a theoretical and an empirical standpoint. We supplement this knowledge by studying how different moments of the distribution of producers' productivity affect the trade elasticity, and in turn how shocks that alter those moments in different ways may have different impacts on aggregate exports. We first show that, to obtain an unbiased measure of that elasticity, gravity regressions have to account not only for the share of producers that export, but also for their productivity premium relative to all producers. This is particularly important when the share is small and the premium is large, that is, when aggregate exports are driven by few overperforming 'superstar exporters'. We then assess how aggregate exports react to shocks entailing the same change in the first moment of the distribution of producers' productivity, but different changes in its higher moments. Our empirical results confirm that taking into full consideration the productivity premium of exporters and the occurrence of 'superstar exporters' is crucial to correctly explain and predict the response of aggregate exports to different productivity shocks. |
| Keywords: | trade flows; superstar exporters |
| JEL: | F12 F14 F17 |
| Date: | 2024–06–19 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:126754 |
| By: | Kassa, Woubet; Woldemichael, Andinet |
| Abstract: | This study documents the impacts of climate change on firm-level productivity by matching a globally comparable and standardized survey of nonagricultural firms covering 154 countries with climate data. The findings show that the overall effects of rising temperatures on productivity are negative but nonlinear and uneven across climate zones. Firms in hotter zones experience steeper losses with increases in temperature. A 1 degree Celsius increase from the typical wet-bulb temperature levels in the hottest climate zone (25.7 degrees Celsius and above) results in a productivity decline of about 20.8 percent compared to firms in the coldest climate zone. The effects vary not only based on the temperature zones within which firms are located, but also on other factors such as firm size, industry classification, income group, and region. Large firms, firms in manufacturing, and those in low-income countries and hotter climate zones tend to experience the biggest productivity losses. The uneven impacts, with firms in already hotter regions and low-income countries experiencing steeper losses in productivity, suggest that climate change is reinforcing global income inequality. If the trends in global warming are not reversed over the coming decades, there is a heightened risk of widening inequality across countries. The implications are especially dire for the poorest countries in the hottest regions. |
| Date: | 2024–05–06 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10762 |
| By: | Broadberry, Stephen (Nuffield College, Oxford); Fukao, Kyoji (Hitotsubashi University); Settsu, Tokihiko (Musashi University) |
| Abstract: | This paper uses recently revised data on Japanese GDP to analyse the process by which Japan caught-up with the West. The new historical national accounts suggest that Japan was more than one-third richer in 1874 than suggested by Maddison, and that the Meiji period growth built on earlier development. We show that (1) despite trend GDP per capita growth during the Tokugawa shogunate, the catching-up process only started after 1890 with respect to Britain, and after World War 1 with respect to the United States and many European nations (2) although catching up was driven by the dynamic productivity performance of Japanese manufacturing, Japanese success in exporting manufactured goods was just as much driven by limiting the growth of real wages (3) despite claims that Japan was following a distinctive Asian path of labour-intensive industrialisation, capital played an important role in the catching-up process. |
| Keywords: | JEL Classification: |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:cge:wacage:749 |
| By: | Bruhn, Miriam; Demirguc-Kunt, Asli; Singer, Dorothe |
| Abstract: | This paper assesses the medium-run effects of government support to firms during the COVID-19 crisis and whether the effectiveness of this support varied with its timing. Using data from three rounds of the World Bank’s Enterprise Surveys COVID-19 Follow-up Surveys carried out between May 2020 and April 2022, it relates government support in Round 1 (received in the first half of 2020) and Round 2 (received during the second half of 2020 or early 2021) with firm performance in Round 3 (generally mid-2021). Controlling for a host of background characteristics, firms that received support in Round 1 performed better in terms of Round 3 sales, but only if they did not have continued support. Firms that also received support in Round 2 had similar Round 3 sales as those that received no support and were more likely to decrease employment. Firms that received government support only in Round 2 experienced no boost in Round 3 performance. The findings suggest that government support should be provided promptly, but it should also be phased out quickly. |
| Date: | 2023–12–12 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10641 |
| By: | Stuart A. Breslin (School of Economics, University of Edinburgh); Andy Snell (School of Economics, University of Edinburgh); Heiko Stueber (University of Applied Labour Studies (UALS), Institute for Employment Research (IAB), Friedrich-Alexander-Universitaet Erlangen-Nuernberg (FAU), IZA); Jonathan P. Thomas (School of Economics, University of Edinburgh) |
| Abstract: | We document distinctive empirical features of wage pass-through in Germany that are consistent with Thomas-Worrall wage contracting in the presence of both idiosyncratic and nonstationary aggregate productivity components. These empirical features are hard to reconcile with the predictions of search models based on period-by-period Nash bargaining over match surplus and with the predictions of financial models where risk neutral firms may costlessly shield risk averse workers from idiosyncratic shocks (Guiso, Pistaferri et al. 2005). |
| Keywords: | Labour contracts, pass-through, limited commitment, asymmetric shocks |
| JEL: | E32 J41 |
| Date: | 2023–11 |
| URL: | https://d.repec.org/n?u=RePEc:edn:esedps:312 |