Common Production Technology Research Articles

What can we learn from industry-level (aggregate) production functions?

ABSTRACT Recent work has revived two intertwined challenges to aggregate production functions (the ‘identity’ and ‘aggregation’ problems). This paper examines both problems in the context of aggregate industry-by-country analysis, first demonstrating the relevance of the identity problem for industry-level analysis and tracing its origin in the System of National Accounts. Using a case study of materials quality in global forestry and logging, the paper then compares estimates from fully physical versus conventional (monetary) production functions to isolate the aggregation problem and show that credible inference depends on appropriately modelling heterogeneity in production processes. Materials quality is measured via finite mixture modelling applied to global satellite data. Attempting to estimate the parameters of a common production technology yields poor results, because of differences in production processes between countries. The paper offers a practical approach for dealing with heterogeneity via Data Envelopment Analysis and heterogeneous coefficient panel estimators, and concludes with guidance to help applied industry-level analysis recognize and avoid both the identity and aggregation problems.

Allocating natural resource reduction amounts: A data envelopment analysis based‐approach considering production technology heterogeneity

AbstractPrevious studies resource allocation methods based on data envelopment analysis assume that all the assessed decision‐making units share a common production technology, and all decision‐making units become efficient after the resources are allocated. However, in the real world, production technology tends to be heterogeneous among the decision‐making units because of the differences in economic development, geographic location, and market conditions. Correspondingly, when some decision‐making units are far away from the efficient frontier, they may not become efficient easily using the resources allocated to them. In this paper, we propose a data envelopment analysis‐based approach which considers production technology heterogeneity among decision‐making units when allocating resource reduction amounts to each. In our model, the decision‐making units are divided into subgroups based on their economic development level, an important indicator directly reflecting each decision‐making unit's production technology level. Each subgroup has its specific production technology, and the decision‐making units in the same subgroup have a similar technology level, which allows better identification of how the production of those decision‐making units can change when their resource inputs change. We present an empirical example using China's mainland provinces as decision‐making units to demonstrate the practicability and applicability of our proposed model.

The Magnitude of the Task Ahead: Macro Implications of Heterogeneous Technology

The empirical growth literature is dominated by accounting and regression methods that assume common production technology across countries. Our empirical model relaxes this assumption and further allows unobservable determinants of output (total factor productivity, TFP) to differ across countries and time, while accounting for endogeneity and cross‐section correlation arising from global shocks. Using manufacturing sector data for 48 economies, we show that the assumption of common technology is rejected in our regressions. We illustrate that the erroneous choice of homogeneous technology has a substantial impact on the patterns and magnitudes of the resulting TFP estimates.

Lorenz comparison between Increasing serial and Shapley value cost-sharing rules

In this paper, we consider the cost (surplus) sharing problem when a coalition of agents operates under a common production technology and share the total cost (resp. output), given their individual demands (resp. input). We compare the allocation inequality between the Moulin–Shenker’s (Increasing) serial and Shapley shares in the Lorenz sense, and show that Increasing serial share dominates the Shapley value when the marginal is decreasing, while the opposite is true when the marginal is increasing. Together with earlier comparisons between the two and the average shares, and the comparison between Increasing and Decreasing serial rules, the result implies a complete Lorenz ordering in equality among the four common sharing allocations: Average, Increasing serial, Decreasing serial and the Shapley value.

Productivity of organic and conventional agriculture – a common technology analysis

The raging debate on organic versus conventional agriculture, and with regard to the aspect of productivity in particular, is far from conclusive. In this analysis, we explore the productivity comparison further through the evaluation of a common production technology used in 74 countries around the world, over the period 2005 to 2014. We found conventional agriculture to be more productive than organic agriculture. Whilst productivity of conventional agriculture is exponentially rising, that of organic is declining, although it has a quadratic growth path. For every hectare of conventional agricultural land given up, only 0.54 hectares of organic land area is substituted. Based on an elasticity of substitution of 0.36, the isoquant is relatively vertical; therefore, much more conventional lands need to be substituted with an organic land area. Research into new and improved fertilising and pest control methods is essential as positive developments there would have a significant impact on organic land productivity.

Productivity of organic and conventional agriculture – a common technology analysis

The raging debate on organic versus conventional agriculture, and with regard to the aspect of productivity in particular, is far from conclusive. In this analysis, we explore the productivity comparison further through the evaluation of a common production technology used in 74 countries around the world, over the period 2005 to 2014. We found conventional agriculture to be more productive than organic agriculture. Whilst productivity of conventional agriculture is exponentially rising, that of organic is declining, although it has a quadratic growth path. For every hectare of conventional agricultural land given up, only 0.54 hectares of organic land area is substituted. Based on an elasticity of substitution of 0.36, the isoquant is relatively vertical; therefore, much more conventional lands need to be substituted with an organic land area. Research into new and improved fertilising and pest control methods is essential as positive developments there would have a significant impact on organic land productivity.

The Hayek Hypothesis and Long‐Run Competitive Equilibrium: An Experimental Investigation

We report on an experiment investigating whether the Hayak Hypothesis (Smith, 1982) extends to the long run setting. We consider two environments; one with a common production technology having a U-shaped long run average cost curve and a single competitive equilibrium, and another with a common constant returns to scale technology having a constant long run average cost curve and multiple competitive equilibria. While there is convergence in both environments to the long run equilibrium, it takes longer and is less robust than usually observed in the short run setting. We show that price formation is adaptive and quickly converges to realized short run equilibrium, but long run investment decisions exhibit very limited rationality. We present and estimate an investment choice model that shows that only minimal rationality, coupled with repeated decisions, is enough to achieve high long run allocative eciency when markets use continuous double auctions. JEL classication: C92; D02

Regional Differences in Measuring the Technical Efficiency of Rice Production in Vietnam: A Metafrontier Approach

This research study employs bootstrap data envelopment analysis and the metafrontier approach to measure and compare the technical efficiency of rice production activities across the regions of Vietnam. Using the metafrontier approach as a common production technology is more effective when wishing to compare relative technical efficiency levels across regions, those which may employ a variety of production technologies. The results of this study reflect the fact that technical efficiency levels vary more across regions when measured with respect to regional frontiers than when using the metafrontier approach. The study finds technical efficiency scores to be high when using regional frontier measurements, but lower when using the metafrontier approach. When using the metafrontier to adjust differences across regional frontiers, while the Mekong River Delta – the main rice producing region in Vietnam – has the highest efficiency, the Red River Delta – which is the second region in terms of rice production – has quite low efficiency scores when compared to some other regions in the country. One of the key findings of this study is that measuring and comparing the technical efficiency of rice production across different regions should not be carried out for individual regions alone, but for all regions.

The Hayek Hypothesis and Long Run Competitive Equilibrium: An Experimental Investigation

We report on an experiment investigating whether the Hayak Hypothesis (Smith, 1982) extends to the long run setting. We consider two environments; one with a common production technology having a U-shaped long run average cost curve and a single competitive equilibrium, and another with a common constant returns to scale technology having a constant long run average cost curve and multiple competitive equilibria. While there is convergence in both environments to the long run equilibrium, it takes longer and is less robust than usually observed in the short run setting. We show that price formation is adaptive and quickly converges to realized short run equilibrium, but long run investment decisions exhibit very limited rationality. We present and estimate an investment choice model that shows that only minimal rationality, coupled with repeated decisions, is enough to achieve high long run allocative efficiency when markets use continuous double auctions.

How Can We Learn Whether Firm Policies Are Working in Africa? Challenges (and Solutions?) For Experiments and Structural Models

Firm productivity is low in African countries, prompting governments to try a number of active policies to improve it. Yet despite the millions of dollars spent on these policies, we are far from a situation where we know whether many of them are yielding the desired payoffs. This paper establishes some basic facts about the number and heterogeneity of firms in different sub-Saharan African countries and discusses their implications for experimental and structural approaches towards trying to estimate firm policy impacts. It shows that the typical firm program such as a matching grant scheme or business training program involves only 100 to 300 firms, which are often very heterogeneous in terms of employment and sales levels. As a result, standard experimental designs will lack any power to detect reasonable sized treatment impacts, while structural models which assume common production technologies and few missing markets will be ill-suited to capture the key constraints firms face. Nevertheless, the author suggests a way forward which involves focusing on a more homogeneous sub-sample of firms and collecting a lot more data on them than is typically collected.

Hydrogen from biomass: large-scale hydrogen production based on a dual fluidized bed steam gasification system

Hydrogen is used as an important feedstock for the chemical industry. Common production technologies for the production of hydrogen from fossil fuels today cause relevant CO2 emissions. Hydrogen from renewable energy sources is discussed as an alternative option to replace traditional feedstock and can therefore be part of a low-carbon energy system. This paper describes the results of a simulation of a concept for the production of hydrogen with biomass as feedstock. The described investigations include a possible process design, the process simulation using the software IPSEpro, a description of the operation characteristics, and a profitability analysis of the applied hydrogen production concept. The simulation result shows that 61 MW of hydrogen can be produced from 100 MW wood chips and 6 MW of electricity. As a result, hydrogen production costs of 54 €/MWh can be estimated. For the investigated concept, the wood chip price is the most important factor for the hydrogen production cost followed by investment costs for the plant and the realized plant operation time per year.

Social Capital and Organizational Change in High‐Involvement and Traditional Work Organizations

We present new evidence indicating that changing from a traditional human resource management (HRM) environment to an innovative one entails a change not only in formal work practices, but also in the informal networks and patterns of interaction among employees. We focus on differences in the social capital of these workplaces and measure differences in the structure of interactions and information transfer among employees across a sample of manufacturing lines with a common production technology and different HRM systems. We then consider the implications of these differences and show that the change from one form of workplace practices to the other is therefore not just a matter of paying for the direct costs of a new set of HRM practices. Rather, it would involve a disruptive overhaul in the entire network of interactions among all workers at the plant.

00/02113 Thermochemical analysis of production of ferrochromium in submerged arc furnace

High carbon ferrochrome is one of the most common ferroalloys produced and is almost exclusively used in the production of stainless steel and high chromium steels. Production takes place primarily in countries with substantial chromite ore supply. Relatively cheap electricity and reductants also contribute to the viability of high carbon ferrochrome. The most common production technology utilized is submerged arc smelting in AC furnaces, although open arc smelting in DC furnaces is becoming increasingly common. A more advanced technology route that includes a prereduction step is only utilized at significant scale by one producer. Production processes have become more energy and metallurgically efficient by utilizing advanced processes such as prereduction, preheating, agglomeration of ore, and CO gas utilization. Recently installed plants display manageable risks in terms of environmental pollution and occupational health.

Asset ownership and market structure in oligopoly: Further results

How does the sale of assets from a small firm to a large firm affect the equilibrium price in oligopoly? Using the ‘cross-sectional differentiation’ technique introduced by Farrell and Shapiro ( Rand Journal of Economics, 1990, 21, 275–292), I show that the equilibrium price rises if the common production technology is homogeneous of degree t, 0< t⩽1.

Molecular Beam Epitaxy (MBE) for Research and Device Fabrication

MBE is no longer a crystal growth technique in laboratories but has recently become a common production technology. GaAs devices, especially HEMT etc. have played an important role in making MBE technique thus popular. The progress of MBE technique also caused the progress of academic research in crystal growth and surface physics. In this paper, a couple of topics of the researches and developments of MBE is described. The present status of the device applications of it is also discussed.