Estimates Of Productivity Growth Research Articles

The Australian construction industry: is the shadow economy distorting productivity?

Estimates of the size and change in the Australian construction industry shadow economy value over time are provided and applied as a quality adjustment to Australian construction industry productivity growth from 1985 to 2012. The results indicate that the Australian construction industry shadow economy is growing and that by adjusting for the shadow economy, distortion is removed from construction industry productivity growth estimates. The findings create significant scope for future research into the estimation and the effect of shadow economic activity on productivity growth, not just in Australia but in other countries as well.

Measuring Productivity When Technologies are Heterogeneous: A Semi-Parametric Approach for Electricity Generation

While productivity growth in electricity generation is associated with multiple positive effects from an economic and environmental perspective, measuring it is challenging. This paper proposes a framework to estimate and decompose productivity growth for a sector characterized by multiple technologies. Using a metafrontier Malmquist decomposition and frontier estimation based on stochastic non-smooth envelopment of data (StoNED) allows for productivity estimation with few microeconomic assumptions. Additionally, evaluation of productivity at representative hypothetical units permits distribution-free analysis for the whole distribution of power plant sizes. The proposed framework is used to analyze a unique and rich dataset of coal, lignite, gas, and biomass-fired generators operating in Germany from 2003 to 2010. The results indicate stagnating productivity for the sector as a whole, technical progress for biomass plants, and very high productivity for gas-fired plants.

Weather shocks and English wheat yields, 1690–1871

We estimate a time series model of weather shocks on English wheat yields for the early nineteenth century and use it to predict weather effects on yield levels from 1697 to 1871. This reveals that yields in the 1690s were depressed by unusually poor weather; and those in the late 1850s were inflated by unusually good weather. This has led researchers to overestimate the underlying growth of yields over the period by perhaps 50%. Correcting for this effect would largely reconcile the conflicting primal and dual estimates of productivity growth over the period.

Productivity Growth of the Nontradable Sectors in China

AbstractLittle is known about the total factor productivity of the nontradable sectors in China. In this paper we estimate productivity growth of the nontradable sectors by studying the relative price movements of the nontradable sectors vis‐à‐vis the tradable sectors, i.e. changes in the internal real exchange rate. We find that prices of the nontradable sectors have risen significantly faster than those of the tradable sectors since China's accession to the WTO, and as a result China's internal real exchange rate has appreciated faster than the renminbi real effective exchange rate. We also find that the nontradable sectors have seen much lower productivity growth than the tradable sectors. We argue that it is important to raise China's productivity growth in the nontradable sectors through policy actions to achieve growth rebalancing and containing inflationary pressures in the medium run.

Productivity growth and product choice in catch share fisheries: The case of Alaska pollock

Many fisheries worldwide have exhibited marked decreases in profitability and fish stocks during the last few decades as a result of overfishing. However, more conservative, science- and incentive-based management approaches have been practiced in the US federally managed fisheries off Alaska since the mid-1990s. The Bering Sea pollock fishery is one such fishery and remains one of the world׳s largest in both value and volume of landings. In 1998, with the implementation of the American Fisheries Act (AFA) this fishery was converted from a limited access fishery to a rationalized fishery in which fishing quota were allocated to cooperatives which could transfer quotas, facilitate fleet consolidation, and maximize efficiency. The changes in efficiency and productivity growth arising from the change in management regime have been the subject of several studies, with a few focusing on the large vessels that both catch and process fish onboard (catcher-processors). This study modifies existing approaches to account for the unique decision making process characterizing catcherprocessor׳s production technologies. The focus is on sequential decisions regarding what products to produce and the factors that influence productivity once those decisions are made, using a multiproduct revenue function. The estimation procedure is based on a latent variable econometric model and departs from and advances previous studies since it deals with the mixed distribution nature of the data, a novel application to fisheries production modeling. The resulting productivity growth estimates are consistent with increasing productivity growth since rationalization of the fishery, even in light of large decreases in the pollock stock. These findings suggest that rationalizing fishery incentives can help foster improvements in economic productivity even during periods of diminished biological productivity.

Panel data and productivity measurement: an analysis of Asian productivity trends

The paper studies consensus estimates of Asian productivity growth from 1980 to 2000. We outline methods that have been proposed to measure productivity growth and its two main factors, innovation and catch-up. We show how such methods have particular canonical representations that seamlessly transfer to the panel data literature and discuss a number of competing specifications introduced into the productivity literature. We then point out how such models can be combined to provide consensus model average estimates of innovation and catch-up, utilizing results from recent work by Hao on world productivity growth. We utilize data from the United Nations Industrial Development Organization to examine productivity trends and its decomposition for a number of different groupings of Asian countries.

The importance and challenges of measuring work hours

Work hours are key components in estimating productivity growth and hourly wages as well as being a useful cyclical indicator in their own right, so measuring them correctly is important. The US Bureau of Labor Statistics (BLS) collects data on work hours in several surveys and publishes three widely-used series that measure average weekly hours. The series tell different stories about average weekly hours and trends in those hours but qualitatively similar stories about the cyclical behavior of work hours. The research summarized here explains the differences in levels, but only some of the differences in trends.

Why high productivity growth of banks preceded the financial crisis

Abstract The high levels of operating efficiency, profits, and market values for banks in the years before the financial crisis raise reasonable doubts about the accuracy of the assessments of the efficiency of banking intermediation. We examine the productivity growth in Spanish banks in the pre-crisis period by separating out the contributions to productivity growth from business practices and from industry-wide technological progress. We find that more than two thirds of the estimated productivity growth in the years 2000–2007 is attributed to banks’ practices, such as the expansion of credit in the housing market, the high recourse to securitization and short-term finance, the reduction in liquidity holdings, and the leveraging process of banks’ balance sheets, that the literature claims are the ultimate causes of the crisis. We estimate that the remaining cumulative annual growth rate is 2.8% for the industry’s technical progress, which is similar to that in the period of 1992–2000.

Why Did High Productivity Growth of Banks Precede the Financial Crisis?

The observed high levels of banks’ operating efficiency, profi ts and market values in the years before the fi nancial crisis raise reasonable doubts about the information content of conventional performance measures for the accurate assessment of the effi ciency of banking intermediation. In this paper we estimate the productivity of individual Spanish banks and the industry’s productivity growth over time using the methodology of Olley and Pakes (1996) and Levinsohn and Petrin (2003), which controls for simultaneity bias. We then examine the contributions of two sets of factors to productivity growth: banking practices that have been signalled as the proximate causes of the crisis, and technical progress in the industry. We obtain that more than two thirds of the estimated productivity growth in the years 2000-2007 is attributable to practices such as the expansion of the housing market, the high recourse to securitization and short-term fi nance, and the leveraging of banks’ balance sheets. The remaining 2.8% cumulative annual growth rate is our estimate for the technical progress in the industry, similar to the estimated rate in the period 1993-2000.

Turkish bank efficiency: Bayesian estimation with undesirable outputs

This paper analyzes the productivity and efficiency of Turkish banks from 2002 to 2010. We obtained estimates of efficiency, productivity growth and efficiency growth using a Bayesian stochastic frontier approach and focused on accounting for Non-Performing Loans (NPLs) for use in our model. Specifically, we introduce NPLs as a bad output in an input distance function, and estimate a system of non-linear equations subject to endogeneity. We confirm that the productivity growth of Turkish banks was positive over the period of this study, which was mainly due to the improvement in technology, while efficiency growth continued to be negative over the same period. Methodologically, we also prove that not accounting for NPLs in estimating the frontier model might seriously distort the efficiency and productivity results. The study also provides measures of shadow prices for NPL and discusses the results in terms of several interesting trends in Turkish banking. Finally, the paper provides efficiency and productivity comparisons between domestic and foreign banks.

Market imperfections, trade reform and total factor productivity growth: theory and practices from India

The study investigates how market imperfections distort the impact of trade reform on productivity growth. As the trade expands it influences both product and factor prices and if the distortions arise due to these market imperfections are not eliminated, the usual estimate of total factor productivity growth, using the growth accounting method, would be misleading. Theoretically, it shows that the usual estimate tends to be overestimated in the export competing sector and underestimated in the import competing sector. A modified approach of Olley–Pakes and Levinsohn–Petrin methods involving three-digits industries over the fifteen major Indian states during the period 1998–2005 has been used to deal with the simultaneity issue of factor choice and market distortions for the better estimate. A positive and significant impact of openness on the productivity growth has been observed only when the market imperfections are eliminated. Moreover, the modified productivity growth, after controlling market imperfections, has turned out to be lower than that of the usual estimate in India.

Productivity change using growth accounting and frontier-based approaches – Evidence from a Monte Carlo analysis

This study presents some quantitative evidence from a number of simulation experiments on the accuracy of the productivity growth estimates derived from growth accounting (GA) and frontier-based methods (namely data envelopment analysis-, corrected ordinary least squares-, and stochastic frontier analysis-based malmquist indices) under various conditions. These include the presence of technical inefficiency, measurement error, misspecification of the production function (for the GA and parametric approaches) and increased input and price volatility from one period to the next. The study finds that the frontier-based methods usually outperform GA, but the overall performance varies by experiment. Parametric approaches generally perform best when there is no functional form misspecification, but their accuracy greatly diminishes otherwise. The results also show that the deterministic approaches perform adequately even under conditions of (modest) measurement error and when measurement error becomes larger, the accuracy of all approaches (including stochastic approaches) deteriorates rapidly, to the point that their estimates could be considered unreliable for policy purposes.

Estimation of productivity growth, technical progress, and efficiency changes in the Korean offshore fisheries

In this study, changes in total factor productivity of 12 Korean offshore fisheries between 1997 and 2009 were estimated through the Malmquist productivity index, which is a nonparametric method. Also, the cause of such changes in productivity of each fishery was analyzed more specifically by segmenting into factors for technological progress and tech- nical efficiency. As a result of this analysis, the total factor productivity change of the entire offshore fisheries was -6.0 %. Changes in the technical efficiency and technological level factors, respectively, contributed 0.2 and -6.2 % to this rate of decrease in total factor productivity; that is, inactivity of technological progress led to the decrease in productivity of the offshore fisheries. In addition, technological progress and technical efficiency were found to differently influence the change in total factor productivity of each fishery. In order for each fishery to improve productivity, better rational fisheries management policies by the government and efforts by the fishing industry and individual fishing business units must accompany factors that promote productivity increase.

Productivity and efficiency at large and community banks in the US: A Bayesian true random effects stochastic distance frontier analysis

This paper compares the productivity and efficiency of large banks and community banks in the United States over the period 1997–2006. This comparison is performed by estimating a true random effects stochastic distance frontier model—a model that is capable of disentangling unobserved heterogeneity from inefficiency—within a Bayesian framework. We find that failure to consider unobserved heterogeneity results in a misleading ranking of banks and mismeasured technical efficiency, productivity growth, and returns to scale. Our results show that, compared with community banks, large banks have experienced much higher productivity growth and higher levels of returns to scale. Our estimates of total factor productivity growth show a clear downward trend for both large and community banks, and our decomposition of the output-distance-function-based Divisia productivity index indicates that technical change is the driving force behind this trend.

Problems with (dis)aggregating productivity, and another productivity paradox

Using a standard definition of productivity growth, it is shown that a country may have higher productivity growth than another country in each sector, but may have a lower productivity growth rate overall. Also, it is shown that popular methods for aggregating firm/industry estimates of productivity growth have a serious problem in that productivity of all firms/industries can go up, but aggregate productivity can fall. This is not necessarily due to changes in the reallocation of resources across firms/industries. Hence, there are problems for the interpretation of previously published articles which use these methods. There can be inappropriate assessments of the cyclical properties of productivity, and the productivity impact of industry dynamics, micro-economic reforms and regulatory change. Index-number methods that avoid these aggregation problems are introduced.

Efficiency and technological change at US research universities

This article investigates the determinants of efficiency and technological progress at US research universities. It relies on a unique panel data set of multiple outputs and inputs from 92 universities covering the period 1981–1998. Over that time span, US universities experienced large increases in industry funding and in academic patenting activity. In this context, the directional distance function and a nonparametric representation of the underlying production technology are combined to obtain estimates of productivity growth and technical efficiency. An econometric analysis is then presented to examine the determinants of technical efficiency and the rate of technological progress. The results show how changes in funding sources for US research universities affects research performance.

When Does Reducing Union Bargaining Power Increase Productivity? Evidence from the Workplace Relations Act*

Despite a large empirical literature, the conditions under which unions have different effects on productivity have not been determined. The Australian Workplace Relations Act 1996 (WRA) provides a natural experiment in which union bargaining power was decreased. We estimate productivity growth before and after the WRA. While the WRA did not increase productivity growth in union firms compared with non-union firms, in industries with more extensive unionisation, productivity growth in union firms was greater post-WRA compared with pre-WRA growth for non-union firms. This suggests unionisation tends to have greater effects on productivity in sectors where it is more extensive.

The Future Outlook for Portuguese Travel Agents

This paper adopts a three-stage procedure to measure and test the productivity and efficiency standings of Portuguese travel agents during 2005–2007. In the first stage, the authors use a bootstrapped Malmquist index approach to obtain estimates of total productivity growth. In the second stage, they obtain year-by-year efficiency scores, using a bootstrapped DEA model. A bootstrapped truncated regression is then adopted in the third stage to identify the covariates that explain technical efficiency. Results from a sample of 25 agents indicate that, on average, Portuguese agents experienced an increase in productivity over the period of the study. On the efficiency side, however, most travel agents were found to be operating at a high degree of inefficiency. Differences in productivity and efficiency between individual travel agents appeared to be related to factors such as market share and management style. The results are discussed and policy implications are derived.

The Luenberger indicator and productivity growth: a note on the European savings banks sector

We employ the Luenberger productivity indicator to estimate productivity growth and its decomposition into technical change and efficiency change components for savings banks sectors in 10 EU countries between 1996 and 2003. The Luenberger indicator requires less restrictive assumptions than standard nonparametric productivity indexes, and it allows the assumption of profit maximization to be made for sample firms. We estimate average productivity growth in the savings banks sector to be 2.78% per annum and driven almost entirely by technical change. Whilst the general results confirm earlier findings, this study is one of the earliest to identify cross-border differences in productivity growth in the savings banks sector.

Estimation of Allocative Inefficiency and Productivity Growth with Dynamic Adjustment Costs

A substantial literature has been generated on the estimation of allocative and technical inefficiency using static production, cost, profit, and distance functions. We develop a dynamic shadow distance system that integrates dynamic adjustment costs into a long-run shadow cost-minimization problem, which allows us to distinguish static allocative distortions from short-run inefficiencies that arise due to period-to-period adjustment costs. The set of estimating equations is comprised of the first-order conditions from the short-run shadow cost-minimization problem for the variable shadow input quantities, a set of Euler equations derived from subsequent shadow cost minimization with respect to the quasi-fixed inputs, and the input distance function, expressed in terms of shadow quantities. This system nests within it the static model with zero adjustment costs. Using panel data on U.S. electric utilities, we contrast the results of static and dynamic shadow distance systems. First, the zero-adjustment-cost restriction is strongly rejected. Second, we find that adjustment costs represent about 0.42% of total cost, and about 1.26% of capital costs. Third, while both models reveal that labor is not utilized efficiently, the dynamic model indicates a longer period of over-use and less variance over time in the degree of inefficiency. With the dynamic model, productivity growth is larger but more stable.