Estimated Output Elasticities Research Articles

Trade Liberalisation and Industrial Productivity: Evidence from Manufacturing Industries in Pakistan

This study examines the impact of trade liberalisation on the industrial productivity for a panel of twenty seven 3-digit manufacturing industries in Pakistan over the period 1980-2006. Using a variant of the Cobb-Douglas production function for industrial sector, we estimated output elasticities. The results show positive output elasticities with respect to labour, capital and raw materials for the pre-trade liberalisation period (1981 –1995) as well as post-trade liberalisation period (1996-2006). For the pre-liberalisation period, we observe positive output elasticity with respect to energy, while it turns out to be negative in the post-liberalisation period probably due to energy crisis in Pakistan. In the second stage, we calculate total factor productivity (TFP) and examine the impact of trade liberalisation on TFP for pre-and post-trade liberalisation periods. The results reveal that trade liberalisation proxied by import duty has positive but negligible impact on the TFP in the pre-as well as post-liberalisation periods. On the other hand, effective rates of protection exert large negative impact on the TFP in the post-liberalisation than the pre-liberalisation period. JEL Classifications: F14, F13, O53, L60 Keywords: Trade Liberalisation, Total Factor Productivity, Manufacturing Sector of Pakistan

Profitability and Resource Use Efficiency in Cassava Production: Evidence from Delta State, Nigeria

Cassava has played and continues to play an outstanding role. The country's failure to meet current demand has been due to the efficiency of farmers' use of resources. The study examined resource use efficiency in cassava production. Data from 120 cassava producers were carefully chosen using random sampling procedure. Descriptive statistics and multiple regression model were applied to analyze the data. The results disclosed that the greater part of the growers were female with mean age of 45 years, educated and married. The mean household size was 6 persons with mean farming experience of 16 years. Majority of the producers belong to farming association. The result of cost and returns shows that the total production cost , total revenue realized and profit were N221,500, N398,000 and N176,500 respectively with BCR of 1.80 which implies that cassava production is profitable. The regression estimated showed that farm sizes, fertilizers, labour and planting material influence the output produced. The estimated output elasticity was 0.934, which means decreasing return to scale. The result indicated that farm size, fertilizers, labour and planting materials were inefficiently used, thereby dropping below the best economic level. The low ratios of MVP / MFC of the entire variables were shown to be less than unitary. Approximately 56.19%, 99.98%, 97.67%, 99.99% and 11.28% increase in MVP are necessary to optimize the allocation of farm size, fertilizer, labour, planting material and agrochemical. Major problems include inaccessibility to financial services, high labour cost, poor market prices and insufficient extension services. Agricultural policies should be aimed at supplying agricultural inputs, such as fertilizer and effective extension programs to guarantee the productive usage of resources. It is also suggested that extension facilities be intensified to provide farmers with information on new innovations and methods of farming while steps should be taken to lessen the militating effect of the constraints. Keywords: Resource Use Efficiency, Cassava Production, Benefit-Cost Analysis, Farmers.

The Effect of Energy Consumption on Output: A Panel Data Study of Manufacturing Industries in Egypt

Subsidizing electricity and non-electrical energy products has affected manufacturing output in Egypt, especially given the structure of Egypt’s manufacturing sector which leaning heavily towards capital- and energy-intensive products. This effect is captured in a production function estimated for the twenty industries making up Egypt’s manufacturing sector over the period 2002-2016. With homogeneous parameters, the estimated output elasticity of energy is 0.28. With panel member parameter heterogeneity, the output elasticity of energy is positive and statistically significant in ten manufacturing industries. Negative and statistically significant elasticity is however found in refined petroleum products, fabricated metal products, and electrical machinery and equipment. This indicates suboptimal energy use. Elasticity is also negative, though statistically insignificant, in: textiles, basic metals, and “other manufacturing”. Except for “other manufacturing”, industries of negative elasticity are all energy-intensive. Moreover, refined petroleum, fabricated metals and basic metals are pollution-intensive. A priority policy measure is to remove subsidies from energy inefficient and polluting industries as opposed to mere ‘across-the-board’ removal.
 Keywords: energy consumption; manufacturing industries; energy- and pollution intensive; Egypt

Macroeconomic transmission of Eurozone shocks to India—A mean-adjusted Bayesian VAR approach

This paper analyzes the macroeconomic transmission of Eurozone shocks to an emerging economy — India using the mean-adjusted Bayesian Vector Autoregressive (BVAR) model. In its quantitative exploration, the study answers two key issues: (i) is there any evidence of decoupling from advanced economy business cycles? And (ii) what was the impact of the Eurozone recession on the growth performance of India? The findings suggest that Eurozone idiosyncratic shocks, on average, had large effects on economic activity in India. The variation explained by the innovations generated by the BVAR model range from 1.8 percent to 3.6 percent in the 1–12 quarter horizon. The main results are supported by the empirical estimations of the Wavelet analysis. The estimated output elasticities suggest that the Eurozone recession had a significant negative impact on India. The implication is that well-balanced diversity in the productive structure of emerging economies, particularly India, can diffuse the transmission of macroeconomic shocks from the advanced economies.

GROWTH MAXIMIZING FISCAL RULE TARGETS IN INDIA

The objective of this paper is to obtain the growth optimizing public debt to GDP ratio ([Formula: see text]*), based on estimated output elasticity ([Formula: see text]) of public sector capital under the golden rule of budgetary deficit. After conducting unit root tests and cointegration analysis, value of [Formula: see text] which is estimated under OLS, CLS and FMOLS, hovers around 0.281–0.29. Hence, the computed value of [Formula: see text]* stands around 65–67% of GDP; modestly lower than the current value (73% in 2016). Since large revenue deficit has been persisting, effective value of [Formula: see text]* would be even lower. Fiscal tightening, especially reducing revenue deficit and offloading the persistently loss making PSUs would be important for macroeconomic stability and accelerating economic growth.

The Effectiveness of Incentive Schemes in the Presence of Implicit Effort Costs

Agents’ decisions to exert effort depend on the incentives and the potential costs involved. So far, most of the attention has been on the incentive side. However, our laboratory experiments underline that both the incentive and the cost side can be used separately to shape work performance. In our experiment, subjects work on a real-effort slider task. Between treatments, we vary the incentive scheme used for compensating workers. Additionally, by varying the available outside options, we explore the role of implicit costs of effort in determining workers’ performance. We observe that incentive contracts and implicit costs interact in a nontrivial manner. In general, performance decreases as implicit costs increase. Yet the magnitude of the reaction differs across incentive schemes and across the offered outside options, which, in turn, alters estimated output elasticities. In addition, comparisons between incentive schemes crucially depend on the implicit costs. This paper was accepted by Yan Chen, decision analysis.

ICT and economic growth – Comparing developing, emerging and developed countries

This paper analyzes the impact of information and communication technologies (ICT) on economic growth in developing, emerging and developed countries. The main question is whether the gains from investments in ICT differ between developing, emerging and developed countries. The analysis is based on a high-quality sample of 59 countries for the period 1995–2010. Various panel data regressions confirm the previously reported positive relationship between ICT capital and GDP growth. For the combined sample of all 59 countries, the estimated output elasticity of ICT is larger than the ICT factor compensation share suggesting excess returns to ICT capital. The regressions for the subsamples of developing, emerging and developed countries do not reveal statistically significant differences in the output elasticity of ICT between these three groups of countries. Thus, the results indicate that developing and emerging countries are not gaining more from investments in ICT than developed economies, calling into question the argument that these countries are ‘leapfrogging’ through ICT.

Knowledge Spillovers, ICT and Productivity Growth

AbstractThis paper looks at the channels through which intangible assets affect productivity growth. The econometric analysis exploits a new data set on intangible investment (INTAN‐Invest) in conjunction with EUKLEMS productivity estimates for 10 EU member states from 1998 to 2007. We find that (a) the output elasticity of intangible capital depends upon ICT intensity, consistent with complementarities between ICT and intangible capital; (b) non‐R&D intangible capital has a higher estimated output elasticity than its factor share, as does (c) an index of labour composition. The last two findings are consistent with growth spillovers from investments in knowledge‐based/intangible capital and skills.

The Contribution of Intangible Assets to Sectoral Productivity Growth in the EU

AbstractIn this paper, we report on new data on intangible investment at the level of one‐digit NACE industries of ten European Union (EU) countries. The data are constructed as a sectoral breakdown by using as control totals the INTAN‐Invest database, which contains measures of intangible investment at the level of the aggregate business sector. With the sectoral data, we assess the contribution of intangibles to productivity growth based on growth accounting and econometric estimation of production functions. The growth accounting contribution of intangibles to labor productivity growth is generally highest in manufacturing and finance. The estimated output elasticity of intangibles lies between 0.1 and 0.2, above factor shares but considerably below values found in previous research using aggregate data.

The Contribution of Intangible Assets to Sectoral Productivity Growth in the EU

In this paper we report on new data on intangible investment at the level of 1-digit NACE industries of 10 EU countries. The data are constructed as a sectoral breakdown of the INTANInvest database, which contains measures of intangible investment at the level of the aggregate business sector. With the sectoral data we assess the contribution of intangibles to productivity growth based on growth accounting and econometric estimation of production functions. The growth accounting contribution of intangibles to labor productivity growth is generally highest in manufacturing and finance. The estimated output elasticity of intangibles lies between 0.1 and 0.2, considerably below values found in previous research using aggregate data.

Quantifying the Determinants of the Intensive Margin of Trade

This paper decomposes within-industry differences in bilateral trade flows across countries into the contributions of (observed) trade costs and (unobserved) product appeal, production costs, and markups. To obtain empirical measures for unobserved characteristics, I estimate the structural parameters of a model of international trade that generalizes the benchmark CES monopolistic competition framework to allow for endogenous markups and variable marginal production costs. The empirical results show that, together, differences in product appeal and production costs account for about 95 percent of the cross-sectional variation in trade flows. The results also provide empirical support to the extended model: the largest varieties have estimated markups up to 12 percent higher than the industry average and the estimated output elasticities suggest supply curves are not perfectly elastic.

Do firm sizes matter for R&D efficiency: evidence for a stochastic metafrontier model

This paper employs the concepts of metafrontier, group frontiers and technology gap ratio for the purpose of investigating differences in R&D efficiency across groups of firms. The study finds that R&D employees, physical capital, R&D expenditure and patent citations are important to produce patents. Large firms with more R&D manpower are associated with higher R&D efficiency. The estimated output elasticity for R&D expenditure input and physical capital input for large firms is higher than that for small firms. The estimated output elasticity for patent citation input in a large firm sample is slightly smaller than that in a small firm sample. Small firm groups are much closer to metafrontier than large firm groups. Small firms have higher R&D efficiency than large firms. The results provide new insights into R&D efficiency and the first step of policymaking to improve R&D environment.

A Restricted Data Envelopment Analysis Application to Dairy Farming

In this study the technical efficiency level of dairy farms in Greece is estimated by imposing weight restrictions on the conventional data envelopment analysis (DEA) model. The assurance region approach is applied on farm record and accounting data from 165 dairy farms. The numerical values of the weight bounds are determined by placing limits on the estimated output elasticities and on the factors' cost share of the total production cost. The imposition of bounds on the DEA weights provides more persuasive efficiency scores and alters the structure of the efficient farms, verifying the importance of placing weight restrictions when dealing with real-life applications.

Medical Tourism Industry in Kangwon Province and Its Economic Impacts on the Region

This paper has two purposes. The first is to suggest the new and simple method to derive a regional input-output model from national input-output table published by the Bank of Korea. The interregional input-output table has not been devised in spite of its potential use while the national table has been made every five years with the revised version during each five years. Second, this paper aims to derive Kangwon interregional input-output model from the national model using the regional supply proportional of industry and to analyze the effect of medical tourism industry on the regional economy of Kangwon Province. The paper measures, in particular, the effect of medical tourism industry on the financial self-sufficiency of Kangwon Province using the estimated output elasticity of tax revenue with the autoregressive distributed lag scheme ADL(1,1) in which the dependent variable ad the single explanatory variable are each lagged once.

Knowledge Spillovers, ICT and Productivity Growth

This paper looks at the channels through which intangible assets affect productivity. The econometric analysis exploits a new dataset on intangible investment (INTAN-Invest) in conjunction with EUKLEMS productivity estimates for 10 EU member states from 1998 to 2007. We find that (a) the marginal impact of ICT capital is higher when it is complemented with intangible capital, and (b) non-R&D intangible capital has a higher estimated output elasticity than its conventionally-calculated factor share. These findings suggest investments in knowledge-based capital, i.e., intangible capital, produce productivity growth spillovers via mechanisms beyond those previously established for R&D.

Aggregate returns to social capital: Estimates based on the augmented augmented-Solow model

We extend the augmented-Solow model to estimate the aggregate output elasticity and depreciation rate of social capital that characterize aggregate returns. The estimated output elasticity is approximately 0.1. While social capital positively affects economic growth, the magnitude is much smaller than that of other production inputs. The estimated depreciation rate is at least 10% per annum, which is higher than that of physical capital. The median value of the implied aggregate return of social capital is approximately 19.11% at the global level. In OECD countries, it is likely to be considerably smaller than the individual returns, suggesting the fallacy of composition. While there is no systematic relationship between GDP per capita and returns to physical or human capital, the aggregate returns to social capital seem to be negatively related to the level of development.

업종별 공업용수의 한계생산가치 및 가격탄력성 추정 연구

본 연구는 수자원정책의 효율성 제고를 위한 판단 자료 제공을 목적으로 업종별 공업용수의 한계생산가치 및 공업용수의 가격탄력성을 추정하였다. 두 가지 형태의 생산함수를 설정하여 추정한 공업용수의 한계가치 및 가격탄력성을 추정 결과를 보면 공업용수의 한계가치는 산업별로 차이가 있으나 공업용수의 평균 가격에 비하여 매우 큰 것으로 추정되었으며 가격탄력성 추정결과는 가격 현실화 정책 효과가 있음을 보여주고 있다. This paper estimates the output and price elasticities of disaggregated industrial water in order to afford some information for improving the efficiency of government water policy. This paper uses the marginal productivity method for estimating the output and price elasticities of industrial water. The estimated output elasticity shows that the value of industrial water is much higher than the average price of industrial water and the estimated price elasticity shows that the water pricing policy is effective for controlling the demand of industrial water.

Estimation des Économies D'échelle et de gamme dans de petites coopératives de services financiers: le cas des caisses populaires acadiennes

This study uses accounting data stemming from 80 credit unions affiliated to the “Fédération des caisses populaires acadiennes” to estimate a multi‐product translog cost function with the aim to test for the presence of scale and scope economies. The cost model relies on the production approach and the financial services are gathered in four categories of products. The model is completed by three inputs and one control variable, the latter being used to capture the heterogeneity of costs arising from the average wealth of membership. Since the estimated output elasticity of the total cost, 0.89, is statistically less than one, the models detect quite important scale economies. As to scope economies, they are present but the coefficients are weakly significant.

An analysis of the optimal provision of public infrastructure: a computational model using Mexican data

We construct a intertemporal general equilibrium model and use it to examine infrastructure effects on Mexican national income. We consider three types of infrastructure, electricity, transportation, and communications. We then estimate production functions for the 16 major sectors of the economy in which sectoral output depends upon inputs of capital and labor, as well as the stocks of the three types of infrastructure. We then use these estimates to analyze the optimal level of government spending on the different types of infrastructure. Despite the fact that the estimated output elasticities with respect to public infrastructure are relatively high, increased expenditure on infrastructure has rapidly decreasing benefits. Some benefits could be achieved by modest increases in capital expenditures, although at the cost of significantly higher inflation and real interest rates. Indeed, the increase in real interest rates causes the benefits of enhance infrastructure to be greatly reduced.

Firm size and employment determination in dutch manufacturing industries

This paper examines whether the determination of employment differs between large and small firms. An employment equation is estimated on panel data of 67 (35) three-digit industries in Dutch manufacturing (1974–1986). The conclusions are as follows. Firstly, employment adjustment appears to be faster in small firms than in large ones. Secondly, the elasticity of factor substitution and the real wage elasticity at constant output are nearly the same for large and small firms. Thirdly, the estimated output elasticities suggest constant returns to scale in large firms and increasing returns in small ones. Finally, the number of working hours has less impact on employment in small firms than in large ones.