Technical Efficiency Effects Research Articles

Investigating the efficiency of foreign exchange reserves using stochastic frontier analysis: Evidence across the globe

AbstractThe purpose of this paper is to analyse the efficiency of the use of foreign exchange reserves (FER) by 21 nations over 5 years across the globe. The study follows an analytical research design to analyse the efficiency levels in the use of foreign exchange reserves using stochastic frontier analysis (SFA). Three models under SFA, that is, Cobb–Douglas production frontier for panel data with half‐normal distributions, translog production frontier with panel data assuming truncated normal distributions and total technical efficiency effects model with panel data, have been used to study efficiency levels. The research uses the nominal value of exports and foreign direct investment as inputs and foreign exchange reserves as output. The results indicate that out of 21 nations, developing countries are found to be more efficient in comparison to developed countries in the use of FER.

Technical Efficiency of Malt Barley Production in Malga District of Southern Ethiopia

This study was conducted to assess the technical efficiency of malt barley production in Malga District of southern Ethiopia using cross-sectional data. Three stages sampling technique was applied to draw 186 sample farmers randomly. The interview schedule was pre-tested before conducting the actual data collection; data gathered from the sample households with the help of trained enumerators. In addition, secondary data were collected through review of relevant documents sources. Descriptive statistical analysis such as mean, standard deviation, minimum, maximum, frequency and percentage were used to analysis basic household characteristics. Cobb-Douglas stochastic frontier production function model was used to estimate technical efficiency and determinants of technical efficiency differentials in malt barley production. Maximum likelihood estimation results implied increasing input variables (area, seed, oxen, fertilizer and labour) would increase yield of malt barley production. The coefficients of elasticity of area, seed, oxen, fertilizer and labour were 0.88, 0.056, 0.033, 0.032 and 0.0125 respectively under malt barley. Consequently, malt barley exhibits increasing returns to scale as the sums of input elasticity were greater than one which is 1.018. The discrepancy ratio, γ, was about 0.67 indicating that about 67% of variation in malt barley yield among the sampled farmers was attributed to technical efficiency effects. The mean technical efficiency of sampled farmers in the production of malt barley was 0.82. The estimated stochastic production frontier model with the inefficiency variables implies that education, experience, extension and livestock positively and significantly affected technical efficiency of malt barley production. Hence, emphasis should be give to improve technical efficiency level of those less efficient farmers by adopting the practices of relatively efficient farmers in the area. Beside this, policies and strategies of the government should be directed towards addressing the implication of statistically significant policy variables. Keywords: Technical efficiency, Cobb-Douglas stochastic frontier, Malt barley, Malga. DOI: 10.7176/ISDE/12-1-03 Publication date: January 31 st 2021

Technical efficiency and environmental impact of seabream and seabass farms

Sea cage farming of seabream and seabass is the most important form of aquaculture production in the Mediterranean Sea. Despite the continuous global growth in aquaculture production and demand, the economic performance of seabream and seabass companies has not followed the same trend. In recent years, companies have faced successive periods of market instability, with high volatility in supply and market prices that have strongly affected their operational margins. Despite the regional importance of this industry, only a handful of studies have examined the economic performance of these farms. In this paper, we investigate the technical efficiency and scale effects of Mediterranean aquaculture farms. Furthermore, environmental impact in terms of nutrient emissions from the farms is examined and discussed. Technical efficiency effects are analyzed using Data Envelopment Analysis (DEA), and the bootstrap procedure is used for bias correction. The results show that the mean technical efficiency could be improved by between 16% and 34%, and scale efficiency suggests that farms could improve their efficiency by operating at an optimal scale. Compared to measurements in previous studies, the environmental variables show that the emission of nutrients from the farms per kilo of fish produced has not changed over the past twenty years. Finally, policy implications suggest that more attention toward improving technical efficiency may help improve the robustness of the sector and that environmental regulation might be needed in order to improve the environmental performance of farms.

The Effect of Service Quality on Patient's Family Satisfaction in the Nicu Care of the Public Hospital in Datu Beru Takengon Region

The World Health Organization (WHO) infant mortality rate is the first indicator in determining a child's health status, 3.6 million of the 120 million newborns experience asphyxia, and nearly 1 million babies die. Meanwhile, the prevalence of patients treated at the NICU at the Datu Beru Takengon Hospital from 2016 to 2019 continues to decline every year. The purpose of this study was to determine and analyze the effect of technical competence, efficiency and patient safety on patient family satisfaction. The research design used an analytic survey with a cross-sectional design. The data that had been collected were processed using univariate and bivariate and multivariate analysis. The population of all parents of babies who were treated in the NICU Care Room at Datu Beru Takengon Hospital was 329 people. The sampling technique used accidental sampling. The number of samples that will be studied is 67 people. The results of the research on technical competence variables obtained p-value = 0,000, efficiency 0,000, and patient safety 0,000 <α 0.05, meaning that there is an influence between technical competence, efficiency and patient safety on family satisfaction, from the results of multivariate analysis, the most influential variables are found. in this study is the technical competency variable with an Exp B value of 1.003. The conclusion is that there is an influence between technical competence, efficiency and patient safety while the multivariate analysis shows that the most dominant factor is the variable of technical competence on family satisfaction. It is recommended that the hospital be able to improve the technical competence of nurses in the NICU room by holding training and workshops both internal and external training.

The Mediating Effect of Technical Efficiency on the Relationship between Revenue Diversification and Financial Performance of Commercial Banks in Kenya

Banks generate revenue through the intermediation process and perceive revenue diversification as a possible solution to financial performance challenges. The banks’ income statements attest to this argument with banking activities moving gradually from interest-bearing activities to non-interest-bearing activities. The objectives of this paper were to assess the relationship between revenue diversification and return on assets and establish the mediation effect of technical efficiency on the relationship between revenue diversification and return on assets. The research used unbalanced panel data sourced from forty-two commercial banks spanning 2009 to 2018. The study measured revenue diversification using the Hirschman-Herfindahl index while technical efficiency level was measured using data envelopment analysis. The performance attribute, return on assets was measured as a ratio of earnings before interest and tax over the total assets. The paper assessed the relationships using the panel least square regression guided by the mediation assessment process proposed by Baron and Kenny. The cross-section randomeffects model results revealed a significant positive relationship between revenue diversification and return on assets. Further, results indicated the absence of technical efficiency mediation effect on the relationship between revenue diversification and return on assets. The study recommends policy and regulatory programs that allows banks to diversify in revenue-generating activities as well as initiatives that synchronize technical efficiency in the intermediation process to improve financial performance of commercial banks, especially in emerging economies.

Multi-criteria assessment of the sustainability of farming systems in the reclaimed desert lands of Egypt

On newly cultivated lands in deserts as in the majority of dryland areas, the sustainability of agricultural systems is often debated in terms of socioeconomic viability and agro-ecological longevity. In these contexts, livestock production systems have raised controversial debates regarding their roles and effects in terms of sustainable development. The objective of this paper is to assess the level (and types) of crop-livestock integration in the dryland systems and whether they result in different well-being and improved efficiency of these agroecosystems. Using an empirical study in the newly reclaimed desert lands of the west part of the Nile Delta (Egypt), we proposed an assessment of the sustainability of the family farming systems using two approaches: a) multiple factor analysis and b) multi-criteria assessment. The multi-criteria assessment highlighted how family farm sustainability depends highly on the integration of livestock into the system, with technical or economic efficiency effects. The multiple factor analysis allowed the distinction of two types of farm systems in which livestock activity could be a source in increasing labour productivity or ensuring the viability of the farm in both short and long terms. So, the two approaches brought out the critical role of livestock in the overall efficiency of the system. However, factor analysis highlighted different profiles of integration and diversification based on-farm assets, and the multi-criteria assessment provided a comprehensive framework for conceptualizing aggregated indicators for the development of sustainable farming systems for the end-users. So these two methods may be complementarity to develop and assess the causal processes of a sustainability assessment.

Driving factors of carbon emissions in China: A joint decomposition approach based on meta-frontier

Production-theoretical decomposition analysis (PDA) is widely used to explore the factors related to changes in carbon emissions. However, traditional PDA mainly focuses on scenarios of decision making units (DMUs) with constant returns to scale, and neglects technology heterogeneity among DMUs. Therefore, this paper proposes a joint approach combined PDA and index decomposition analysis (IDA) based on the variable returns to scale (VRS) and the meta-frontier model, and further decomposed the change of carbon emissions into 9 driving factors. Based on above, we investigated the effects of the nine factors on the change of carbon emissions at national, regional and provincial levels in China during the period of 2007–2016. The results indicated that the increase of carbon emissions in China have slowed down since 2012, but the overall situation is not optimistic, especially in the western region. Economic activity played a dominant role in increasing carbon emissions for each region. Carbon emission efficiency and potential carbon factor were also the two important factors related to increase carbon emissions. Conversely, energy intensity, the catch-up effect of pure technical efficiency and scale efficiency on carbon emissions played a positive role in decreasing CO2 emissions, especially for the eastern region. However, the driving factors related to energy usage, such as the catch-up effect of energy usage scale efficiency and the pure energy usage technical efficiency had trifling and unstable effects on the change of carbon emissions. Based on the above analysis, we propose suggestions to reduce carbon emissions.

Exploring the sources of financial performance in Chinese banks: A comparative analysis of different types of banks

Since significantly organizational difference in Chinese banks, this study makes an attempt to investigate whether there exist some differences of the financial performance and its decomposed components for Chinese banks. We employ the decomposition of profit change model introduced by Grifell-Tatje and Lovell (2015, P215) and normalized price definition of Balk (2018) to develop a normalized profit change decomposition model which can well deal with the firms’ scale difference. This model also decomposes the normalized profit into the technical efficiency effect, technical effect, size effect, price and quantity margin effect, and price recovery effect. For the empirical evidence, we find that although there is an increase of profit gains, the profit growth rate decline by year. Furthermore, the productivity is not the main factor to expand profits, quantity margin effect also makes peer contributions. Finally, the productivity effect and its decomposed components present different functions in different kinds of Chinese banks.

Understanding the components of profitability and productivity change at the micro level

Purpose The purpose of this paper is to present a refined framework providing clarity in terms of the components of profitability and productivity change from the perspective of the firm level. Design/methodology/approach The literature is analysed with a scoping study and a systematic literature review. Productivity measurement approaches are compared using data at the product level. Findings The definition of total factor productivity (TFP) in the literature negatively affects the accuracy of profitability and productivity measurement. In the usual case of a dynamic output mix, TFP change encompasses biasing output mix effects relating to profitability, but not to productivity change. Therefore, this paper defines changes of a ratio of output quantities to input quantities not as TFP change, but as quantitative profitability (QP) change. A framework is proposed decomposing profitability change into price recovery and QP change, whereas the latter comprises of valid productivity change (encompassing technological, technical efficiency and productivity-related scale effects) and output mix change (encompassing proportion, quality, output switching and profitability-related scale effects). Research limitations/implications Future research should include literature from the industrial organisation field of economics. The presented framework should be transferred to the standard production function framework used in economics. Practical implications The paper can help preventing faulty decision making or distrust due to the use of biased profitability or productivity indicators. TFP-based productivity indicators are unsuitable for most firms. To measure productivity meaningfully, firms should use adequate approaches (e.g. standard input- or adjusted total factor productivity-based ones). Originality/value The paper contributes to a more accurate performance measurement approach, as researchers and practitioners better understand the components of profitability and productivity change.

Agricultural trade liberalization, regional trade agreements and agricultural technical efficiency in Africa

Despite increased agricultural trade liberalization, high productive inefficiency in agriculture has kept Africa as a net importer of agriculture products. Empirical studies have focused on the trade liberalization–productivity growth nexus and overlooked the efficiency linkage. Also the role of regional trade agreements (RTAs) and institutions in reducing inefficiency in agriculture have been sidelined. We use a stochastic frontier approach and single-stage maximum likelihood estimation of a true fixed-effects panel data model for our analysis. Using maize and rice data, we provide evidence that through technology transfer, agricultural trade statistically improves technical efficiency. Moreover, results suggest that RTAs provide favourable technical efficiency effects, which varies across products and membership. Furthermore, we document that while regulatory quality reduces technical inefficiency, control of corruption increases it. Our findings call for increased role of RTAs in promoting agricultural trade liberalization. This should be complemented by further strengthening of institutions involved in the agriculture value chain.

What Factors Drive Air Pollutants in China? An Analysis from the Perspective of Regional Difference Using a Combined Method of Production Decomposition Analysis and Logarithmic Mean Divisia Index

Air pollution in China attracts the world’s attention, so it is important to study its driving factors for air pollutants. The combined Production Decomposition Analysis and Logarithmic Mean Divisia Index (PDA–LMDI) model is applied to construct a regional contribution index in this study to explore the regional differences in factors affecting sulfur dioxide (SO2), nitrogen oxides (NOx), and particulate matter with diameter not greater than 2.5 µm (PM2.5) from 2005 to 2015 in China. The regional emission coefficient had a great inhibitory effect, which reduced SO2, NOx, and PM2.5 by 25,364.9, 10,449.3, and 11,295.3 kilotons (kt) from 2005 to 2015, respectively. For this inhibitory effect, the degree to emission reduction was great for North and East China, followed by South and Central China, and small for Southwest. Northwest. and Northeast China. The regional technical efficiency, technology improvement, capital-energy substitution and labor-energy substitution effects each reduced SO2, NOx, and PM2.5 by about 3500, 3100, and 1500 kt from 2005 to 2015, respectively. For the regional technical efficiency and technology improvement effects, the degree to emission reduction was great in East and Central China, and small in South Northwest and Northeast China. For the regional capital- and labor-energy substitution effects, the degree of emission reduction was great for North East and Central China, and small for Northwest and South China. The regional output proportion effect increased SO2, NOx, and PM2.5 by 1211.2, 320.1, and 277.8 kt from 2005 to 2015, respectively. The national economic growth had a relatively great promoting effect and increased SO2, NOx, and PM2.5 by 26,445.5, 23,827.5, and 11,925.5 kt from 2005 to 2015, respectively. Each region should formulate relevant policies and measures for emission reduction according to local conditions.

Indonesia Industrial Productivity Growth: Evidence of Re-industrialization or De-industrialization?

This study employs a Stochastic Frontier Analysis to decompose Total Factor Productivity for the manufacturing corridor of Indonesia. Technological progress, technical efficiency change, and scale effects are captured at a firm level covering all Java provinces from 2007 to 2013. The period is of particular interest as it covers the efforts of re-industrialization under the Master Plan for Acceleration of Indonesian Economy (MP3EI) and the sharp increase-decrease in global demand and global prices. The study captures sources of productivity growth supporting/deterring output growth, differentiating across firm characteristics based on size (large and medium), technology intensity, skill intensity, location (province), and capital-output ratio employed in production. As firms differ in the five elements, productivity and efficiency performance also differ. This paper questions whether productivity growth is limited to conventional sources -input growth and technological progress-, or if manufacturing is managing some gains through non-conventional channels -technical efficiency and scale effects. The paper also questions the presence of patterns in productivity among group firms (characteristics), finding that firms which combine a low-tech level, a higher skill ratio, and are medium in scale reported TFP at least 70 % higher than the average firm. Combinations of firm size, technology, skills, and ratio output affect the performance. Cost analysis of factors of production is also carried out, finding that energy is canceling out possible gains in scale effects by rising disproportionately both in consumption and prices. TFP growth was found to be negative and falling, raising the possibility of a path towards de-industrialization.

Environmental regulation and carbon emission: The mediation effect of technical efficiency

Abstract The mechanism of the environmental regulations affecting carbon emissions is complex, and for many years it has been a hot research topic for researchers. However, few of the previous studies have focused on whether or not environmental regulations can potentially influence carbon emissions through technical efficiency. Therefore, the present study chose to investigate the mediation effects of the technical efficiencies between environmental regulations and carbon emissions using the provincial panel data of energy-intensive industries for the period ranging from 2005 to 2015. The results were as follows: (i) In regard to the entire group of energy-intensive industries, it was found that environmental regulations could not only potentially directly reduce carbon emissions, but also indirectly reduce carbon emissions through technical efficiency. In other words, technical efficiency had played a partial mediation role between the environmental regulations and the carbon emissions; (ii) It was observed that for the different subdivided energy-intensive industries, the different levels of technical efficiency had shown various mediation effects. For example, the mediation effects of technical efficiency in the petroleum processing and coking (PPC) industry; papermaking and paper products (PPP) industry, and raw chemical materials and chemical products (RCMCP) industry, were found to be similar to those of the whole energy-intensive industries. Furthermore, the “Porter Hypothesis” had been verified in the nonmetal mineral products (NMP) industry. However, there were no mediation effects observed in the smelting and pressing of ferrous metals (SPFM) and smelting and pressing of nonferrous metals (SPNM) industries; (iii) In this study, in accordance with the regression results of the double-threshold models, it was found that for the energy-intensive industries as a whole, the carbon emission reduction effects of environmental regulations had become stronger with the increases in technical efficiency. For the PPP and RCMCP industries, there was an inverted U-shaped relationship observed between environmental regulations and carbon emissions when the technical efficiency was taken as the threshold variable. Therefore, based on the research conclusions achieved in this study, some policy recommendations were put forward.

Technological catching-up and structural convergence among US industries

Using a non-parametric programming framework, we analyze technological catching-up and structural convergence among 63 North American industries over the period 1987–2016. These two convergence processes can be estimated by efficiency gaps decomposed into two components: a technical efficiency effect taking into account industry size heterogeneity and a structural component which highlights the impacts of an input-output deepening or expanding effect over time. Secondly, a panel data analysis is performed to link input and output price evolutions with changes in technological catching-up and structural convergence. Results clearly show that convergence is observed for both technical and structural components. The impact of these convergence processes on the US economy is estimated at around 0.56 percentage points of additional growth and could be related to the liberalization of international trade and the increase of import competition. Moreover, these two convergence processes have positive influence on final demand prices and profitability but negative impact on suppliers' prices while no effect can be established on employees' wages or capital providers' remunerations.

Decomposition of Output and Productivity Growth in the 2-Digit Manufacturing Industries in India:An Interstate Analysis

The study examines and applies the theoretical foundation of the decomposition of output total factor productivity growth (TFPG) of the 2-digit manufacturing industries in India and in its fifteen major industrialized states from 1981-1982 to 2010-2011, during the pre- and post-reform period (1981-1982 to 1990- 1991and 1991-1992 to 2010-2011). Output growth is decomposed into input growth effect and TFPG where the three attributes of TFPG are adjusted scale effect technological progress and technical efficiency change. A stochastic frontier model with a translog production function is used to estimate the growth attributes of TFP of the 2-digit manufacturing industries in 15 major industrialized states vis-a-vis all-India. Empirical results show that input growth effect is the major contributor to output growth, whereas TFPG sometimes remains inadequate even though it has a significant effect on output growth. Technological progress is found to be the major contributor to TFPG and the decline in it of the 2-digit manufacturing industries in almost all the states as well as in all-India during the post-reform period is due to decline in technological progress of the same. The scale effect has also become important in recent years, but the impact of technical efficiency effect becomes negative in most cases. The relevant policy implication for a sustainable post-reform Indian economy is the need to improve TFPG components of the manufacturing industries for the overall balanced growth of the economy.

An expanded decomposition of the Luenberger productivity indicator with an application to the Chinese healthcare sector

The objective of this research is to combine productivity analysis at the “firm-level” and the “industry-level” so that a novel, fuller decomposition of the sources of productivity change can be undertaken. Productivity change is decomposed into technological progress, technical, mix, and scale efficiency effects. Specifically, our decomposition allows us to capture changes in productivity due to the reallocation of inputs or outputs across productive units. In practice, such reallocation might take place across plants operated by the same firm, across regions within a country, or via mergers and acquisitions. The new decomposition of the aggregate Luenberger productivity indicator is illustrated using data at both the provincial and regional levels for China's healthcare sector over the period 2009–2014. Our results indicate that the growth of the aggregate Luenberger productivity indicator varied across both time and regions. We find that China's regional productivity growth in healthcare was primarily driven by technological progress, while the contributions of the other components of productivity change were smaller and more varied across regions.

Productivity growth of Indonesian rice production: sources and efforts to improve performance

PurposeThe purpose of this paper is to investigate the productivity of rice production by decomposing the growth of total factor productivity (TFP) into four components: technological change, scale effects, technical and allocative efficiencies.Design/methodology/approachThis study employed an econometric approach to decompose TFP growth into four components: technological change, technical efficiency, allocative efficiency and scale effect. Unbalanced panel data used in this study were surveyed in 1994, 2004 and 2014 from 360 rice farming operations. The model used the stochastic frontier transcendental logarithm production technology to estimate the technology parameters.FindingsThe results indicate that the primary sources of TFP growth were technological change and allocative efficiency effects. The contribution of technical efficiency was low because it grew sluggishly.Research limitations/implicationsThis study has several shortcomings, such as very lowR2and the insignificant elasticity of labour presented in the findings. Another limitation is the limited time period panel covering long interval, which resulted in unbalanced data.Practical implicationsThe government should improve productivity growth by allocating more areas for rice production, which enhances the scale and efficiency effects and adjusting the use of capital and material inputs. Extension services should be strengthened to provide farmers with training on improved agronomic technologies. This action will enhance technical efficiency performance and lead to technological progress.Social implicationsAs Indonesian population is still growing at a significant rate and the fact that rice is the primary staple food for Indonesian people, the productivity of rice production should increase continually to ensure social security at a national level.Originality/valueThe productivity growth is decomposed into four components using the transcendental logarithm production technology based on farm-level data. The measure has not been conducted previously in Indonesia, even in rice-producing countries.

A Bayesian semiparametric approach to stochastic frontiers and productivity

In this paper we take up the analysis of production functions / frontiers removing the assumptions of known functional form for the productivity equation, given the heterogeneity of productivity and the endogeneity of inputs at firm level. The assumption of exogenous regressors is removed through taking account of the first order conditions of profit maximization. We introduce latent dynamic stochastic productivity in our framework and perform Bayesian analysis using a Sequential Monte Carlo Particle-Filtering approach. We investigate the performance of the new approach relative to alternative methods in the literature, in a substantive application to Indian non-financial firms, and find that total factor productivity (TFP) growth has remained stagnant at firm level in India despite rapid growth at the aggregate level, with technical efficiency or catching-up effect driving TFP growth in the recent years rather than technological progress or frontier shift.

On estimating efficiency effects in a stochastic frontier model

This paper proposes a technical efficiency effects model within the framework of stochastic production frontier. The efficiency effects are specified by a standard normal cumulative distribution function of exogenous variables which ensures the efficiency scores to lie in a unit interval. This specification eschews one-sided error term present in almost all the existing inefficiency effects models. The efficiency scores are obtained directly once the parameters of the model are estimated. An empirical exercise based on the widely used Philippines rice farming data illustrates the simplicity and usefulness of the proposed model.

Innovation inputs and efficiency: manufacturing firms in Sub-Saharan Africa

PurposeCountries in Africa have a common goal policy of industrialisation that is expected to be driven by investing in innovation that yields efficiency. The purpose of this paper is to investigate the technical efficiency effects arising from innovation inputs including internal R&D, human capital development (HCD), and foreign technology adoption in manufacturing firms in Africa.Design/methodology/approachThis study uses cross-sectional firm-level survey data from the 2013 World Bank Enterprise Survey and the linked 2013 Innovation Follow-up Survey. A heteroscedastic half-normal stochastic frontier is used for analysing the technical efficiency effects of innovation inputs of 418 firms.FindingsThis study reveals that internal R&D, and foreign technology have negative effects on technical efficiency. Notwithstanding, the combination of foreign technology and internal R&D, and foreign technology and HCD reinforce each other’s effects on technical efficiency.Practical implicationsThis study provides evidence that whereas individual innovation inputs may not yield positive efficiency outcomes, the combination of absorptive capacity enhancing inputs comprising internal R&D and HCD with foreign technology is vital for enhancing technical efficiency in manufacturing firms in Africa. This study offers important lessons for managers in manufacturing firms in Africa.Originality/valueThis study is virtually the first to investigate the relationship between innovation inputs and efficiency in Africa. This study demonstrates that investing in foreign technology in isolation from absorptive capacity enhancing innovation inputs diminishes efficiency. HCD and internal R&D are imperative for building absorptive capacity that enhances efficiency outcomes arising from foreign technology.