Increase In Total Factor Productivity Research Articles

Raising the standard: Minimum wages and firm productivity

This paper exploits the introduction of the National Minimum Wage (NMW) in Britain and subsequent increases in the NMW to identify the effects of minimum wages on productivity. We find that the NMW increased average labour costs for companies that tend to employ low paid workers, both upon the introduction of the NMW and more recently following the Great Recession when many workers experienced pay freezes or wage cuts, but the NMW continued to rise. We find evidence to suggest that companies responded to these increases in labour costs by raising labour productivity. These labour productivity changes did not appear to come about via a reduction in firms' workforce or via capital-labour substitution. Rather they were associated with increases in total factor productivity, as theories of organisational change, training and efficiency wages would suggest.

The role of production factor quality and technology diffusion in twentieth-century productivity growth

The twentieth century was a period of exceptional growth, driven mainly by the increase in total factor productivity (TFP). Using a database of 17 OECD countries over the 1890–2013 period, this paper integrates production factor quality into the measure of TFP, namely by factoring the level of education of the working-age population into the measure of labor and the age of equipment in the measure of capital stock. We then estimate how the diffusion of technology impacts the growth of this newly measured TFP through two emblematic general purpose technologies, electricity and information and communication technologies (ICT). Using growth decomposition methodology from instrumental variable estimates, this paper finds that education levels contribute most significantly to growth, while the age of capital makes a limited, although significant, contribution. Quality-adjusted production factors explain less than half of labor productivity growth in the largest countries except for Japan, where capital deepening posted a very large contribution. As a consequence, the “one big wave” of productivity growth (Gordon in Am Econ Rev 89(2):123–128, 1999), as well as the ICT productivity wave for the countries which experienced it, remains only partially explained by quality-adjusted factors, although education and technology diffusion contribute to explain the earlier wave in the USA in the 1930s–1940s. Finally, technology diffusion, as captured through our two general purpose technologies, leaves unexplained between 0.6 and 1 percentage point of yearly growth, as well as a large proportion of the two twentieth-century technology waves. These results both support a significant lag in the diffusion of general purpose technologies and raise further questions on a wider view on growth factors, including changes in the production process, management techniques and financing practices. Measurement problems may also contribute to the unexplained share of growth.

Effects of local and civil environmental regulation on green total factor productivity in China: A spatial Durbin econometric analysis

This paper employs metafrontier malmquist luenberger index and a spatial Durbin model to investigate the influence of both local and civil environmental regulation and its spatial spillover effect on green total factor productivity in 273 cities of China in 2003–2013. According to city political attribute and regional differences, this article divides the sample city into six categories. The results show that effect of local environmental regulation on green total factor productivity is significantly positive in high political attribute cities (A1 and A2 zone), but negative effects in lower political attribute cities (B2 and B3 zone). Moreover, the ‘race to the top’ results in significantly positive spatial spillover effects from local environmental regulation on green total factor productivity in high political attribute cities (A1 and A2 zone), while the ‘race to the bottom’ causes significantly negative spatial spillover effects in lower political attribute cities (B2 and B3 zone). As for civil environmental regulation, it has positive direct and indirect effects in promoting green total factor productivity. We further find that environmental regulation inhibits the original technological innovation of enterprises, which suggests that government should reduce market intervention, improve enterprise flexibility of market change, and promote enterprises to carry out the original technological innovation. Thus, the government and citizen should make targeted pollution-reduction policies for the green total factor productivity increase.

An evaluation study of research efficiency of the Guangzhou institute of respiratory diseases based on malmquist index.

This study aimed to analyze the dynamic changes of the scientific research innovation efficiency of Guangzhou Institute of Respiratory Diseases (GIRD) during the year 2009-2013 to explore the reason for these changes and give some suggestions on how to improve the overall efficiency of the Institute. The panel data used in this study were taken from 19 research teams of GIRD during 2009 to 2013. Data envelopment analysis (DEA) based on Malmquist index (MI) was used to analyze the performance of each research team in terms of productivity changes over time. Data were analyzed using DEAP 2.1 software. The annual average increase rate of total factor productivity (TFP), technological progress, technical efficiency, pure technical efficiency, and scale efficiency was 30.4%, 22.5%, 6.4%, 0.9%, and 5.4%, respectively from 2009 to 2013. The scientific research innovation efficiency of the GIRD was generally high and kept on growing. The increase of TFP was mainly caused by the progress of tech, the descending of TFP in some teams should be mainly attributable to the declining pure technical efficiency, and scale efficiency on the whole, maintaining a stable growth at a low speed. To achieve higher scientific research innovation, GIRD not only needs to further improve the management level and introduce advanced management mode, but also needs to focus on optimization of resource allocation, as well as to strengthen the talent introduction, and continue to maintain the absorption of new technologies and innovation.

Efficiency and productivity changes in Greek airports during the crisis years 2010–2014

The aim of this study is to evaluate the operating efficiency and productivity changes of the Greek airports, during the first years of the severe economic crisis in Greece (2010–2014), by using two methods: Data Envelopment Analysis (DEA) and Malmquist Productivity index (MPI). Findings have shown that, despite the dramatic effects of the economic crisis on the socio-economic life of the country, overall airport efficiency and productivity improved, mainly due to exogenous factors such as international tourism growth. The MPI reveals that over the period of the study, airports have experienced an annual average increase in total factor productivity (TFP) of 0.9% (an increase of 3.6% over the examined period). On examining the components of this productivity change, it becomes evident that this is due to the combination of both positive (a slight progress) annual average technology change (0.5%) and technical efficiency change (0.4%). The results also indicate that 65.8% of airports have an increase in average TFP during the period 2010–2014, ranging between 0.4% and 20%. However, as Greek airports operate at poor levels of efficiency, there is still considerable space for improvements in most of the airports.

ENTRY BARRIERS, COMPETITION, AND TECHNOLOGY ADOPTION

I build a model of technology adoption to study the quantitative effect of entry barriers on total factor productivity (TFP). In my model, incumbent firms choose technologies that are sufficiently productive to deter entry from a potential competitor. I show that higher entry barriers help to deter entry and lead to the choice of less productive technologies. A novelty of my work is that I use a direct measure of entry barriers. I find that reducing entry barriers from their average level in the poorest 30% of countries to their U.S. level leads to a sizeable increase in aggregate TFP of 12%. (JEL O11, O43)

Under pressure: how the business environment affects productivity and efficiency of European life insurance companies

Deregulation and widespread economic changes have fundamentally affected the business environment of European life insurance companies over the last decades. We apply multi-stage data envelopment analysis to identify the impact of the changing environment on productivity and efficiency of European life insurance companies. Considering a sample of 970 life insurance companies from 14 European countries, we show that general economic, capital market, and insurance market conditions are important drivers of efficiency. Although we find no technical change in the European life insurance sector, we nonetheless observe an efficiency increase in 2002–2013 that leads to an increase in total factor productivity; these trends can be explained by more challenging business conditions in the 2000s. Our results emphasize the need to control for the business environment in cross-country efficiency studies.

A Malthus-Swan-Solow model of economic growth

In this paper we introduce in the Solow-Swan growth model a labor supplybased on Malthusian ideas. We show that this model may yield several steadystates and that an increase in total factor productivity might decrease thecapital-labor ratio in a stable equilibrium.

Religiosity and Long-Run Productivity Growth

In this paper, we show, using a panel of developed countries, that there is a long-run negative association between church attendance and total factor productivity (TFP) with predictive causality running from declining church attendance to increasing factor productivity. According to our preferred estimate, about 18% of the increase in TFP from 1950 to 1990 is caused by declining religiosity. In order to explain this phenomenon, we integrate into standard R&D-based growth theory a micro-foundation of individual cognitive style, which is either intuitive-believing or reflective-analytical. Under the assumption that R&D productivity is positively influenced by a reflective-analytical cognitive style, we find that secularization leads to an increasing labor share in R&D and gradually increasing productivity growth. We use these insights to reflect on trends in religiosity and R&D-based growth in the very long run, from Enlightenment to the present day.

The Role of Production Factor Quality and Technology Diffusion in 20th Century Productivity Growth

20th century growth has been an exceptional period in the history of mankind, relying mostly on increase in total factor productivity (TFP). Using a 1890-2013 17-OECD country database, this paper improves the measurement of TFP by taking into account production factor quality, i.e. the education level of the working-age population for labor and the age of equipment for the capital stock. However, our main contribution is to assess the role of technology diffusion to TFP growth through two emblematic general purpose technologies, electricity and information and communication technologies (ICT). Using both growth decomposition methodology and instrumental variables estimates, this paper finds that, among factor quality, education levels have posted the largest contribution to growth, while the age of capital has a significant, although limited, contribution. Quality-adjusted production factors explain less than half of labor productivity growth in the largest countries but Japan, where capital deepening posted a very large contribution. As a consequence, the “one big wave” of productivity growth (Gordon, 1999), as well as the ICT productivity wave for the countries which experienced it, remains only partially explained by quality-adjusted factors, although education and technology diffusion contribute to explain the US earlier wave in the 1930s-1940s. Finally, technology diffusion, as captured through our two general purpose technologies, leaves between 0.6 and 1 point of yearly growth, as well as a large share of the two 20th century technology waves, unexplained. These results support both a significant lag in the diffusion of general purpose technologies and a wider view on growth factors, encompassing changes in the production process, management techniques or financing practices.

The Convergence Analysis of Regional Growth Differences in China: The Perspective of the Quality of Economic Growth*

This paper develops a biennial Malmquist-Luenberger productivity index, in which it takes resources and the environment into account, and use a spatial econometric analysis to measure the Chinese provincial spatial convergence of the total factor productivity (TFP) to conclude its decomposition. The empirical results show that: 1) China’s TFP increase significantly in recent years, mainly driven by technical improvement; 2) there is nationwide conditional convergence of productivity except for diffusion in the northeast and east regions. Because of the large spatial differences amongst various areas in China, the convergence of different region is affected by different factors; 3) we expect that “resource curse” would present in the regions in China excluding east regions. “Pollution haven” exists in the Central and western areas, suggesting that the perspective of China’s industrial environment is not optimistic; 4) the current ownership structure does not facilitate TFP growth, and industrial structure of inland areas limits local TFP growth. In general, if policy makers intend to converge the development gap between regions, assisting the developing areas to catch up with the relatively developed regions, it is crucial to improve the system of state-owned enterprise and the industrial structure, and government also needs to evaluate and test the effect of FDI rationally.

Globalization and the Knowledge-Driven Economy

The study implements the Schumpeterian notion of creative reaction to articulate and test the hypothesis that the shift to the knowledge economy in advanced economies is the result of the creative reaction of firms, caught in out-of-equilibrium conditions by the fast globalization of product and factor markets since the last decade of the 20th century. Advanced countries specialized in the generation and exploitation of knowledge because of its relative abundance stemming from their sophisticated knowledge governance mechanisms and the large stock of knowledge. In turn, this had strong positive effects on total factor productivity. The empirical analysis confirms that in advanced economies the specialization in knowledge-based activities substituted for the previous specialization in mass manufacturing activities supporting the increase of total factor productivity. The new specialization in knowledge-intensive activities has been stronger in cases where patent activities have been more intense and the exposure to international trade and the revenue per capita have been larger.

The impact of transformation on economic efficiency – a case study of financial holding companies in Taiwan

The present study examines the question of whether the transformation of Taiwan's banks into financial holding companies (FHCs) has led to an improvement in operating efficiency. The results indicate that while comparison of FHCs and banks shows that FHCs are significantly more efficient than non-FHC banks, if the comparison is made in terms of efficiency before and after conversion to FHC status, then no significant increase in total factor productivity (TFP) is seen after conversion to FHC status. The study's results indicate that while the transformation of some Taiwanese banks into FHCs has made these banks more competitive vis-à-vis other, non-FHC banks, the conversion to FHC status has not made any significant contribution towards these banks’ own efficiency growth. Government should keep encouraging the conversion of FHC banks, and, furthermore, stimulate the FHC banks on financial reform and overseas market expansion in order to elevate the efficiency of Taiwan financial industry.

English

In this study, total factor productivity (TFP) with variance in its components as well as the technical efficiency levels of 25 active sugar factories in Turkey are surveyed via Data Envelopment Analysis (DEA) and Malmquist Total Factor Productivity method using the panel data from Turkish Sugar Factories Corporation’s annual activity reports. The aim of the study is to determine the comparative production performances of active sugar factories in Turkey, which would guide both government policies about the sector and the factory managements in the decision making process about issues such as production, growth and profit/cost analysis. It is found that sugar factories in Turkey show increase in TFP stemming from technological improvement in general. Although there is an increase in TFP and technical efficiency, it is nowhere near the one in technological efficiency. Considering the fact that variance in technical efficiency is set by scale efficiency and pure efficiency, the ability of production in optimal scales is found to be low imposing a more congruent use of already possessed production factors. These results put forward the need for increase in competitive capacity and resource management for the sugar factories in Turkey. Key words: Sugar factories, efficiency, productivity, data envelopmant analysis, Malmquist index.

A Schumpeterian growth model: wealth and directed technological change

This paper explores the effects of the accumulation of savings on the creative reaction of firms, the search for technological congruence and the direction of technological change with a Schumpeterian model of endogenous growth. The model shows how the accumulation of wealth accounts for the reduction of the relative user cost of capital and activates, with proper levels of knowledge governance, the creative reaction of firms, search for higher levels of technological congruence and the introduction of directed technological change with higher levels of capital intensity. The dynamics of accumulation of wealth and induced technological change accounts the self-sustained increase of total factor productivity.

Musings on the Social Discount Rate

This paper is mainly concerned with weighted-average measures of the social discount rate, where the components of the average are the marginal productivity of investment (measured by its gross-of-tax rate of return), and the marginal rate of time preference (measured by the net-of-tax yield of capital). We believe that these components should best be measured using data (the national accounts) that span the whole economy and reflect the product actually produced and the rewards actually perceived. We use a methodology based on just four familiar parameters to generate productivity estimates applicable to a wide range of countries. In the process, we make an adjustment for infrastructure investment, also excluding income from land, monopoly markups, supra-marginal returns due to increases in total factor productivity (TFP), and returns to capital in financial intermediation. The end products are estimates of social discount rates averaging around 8% for the advanced countries, and 10% for healthy developing countries and Asian Tigers.

Zimbabwe commercials banks efficiency and productivity analysis through DEA Malmquist approach: 2002-2012

Majority of data envelopment analysis studies have been focused on developed economies and economies in Asia, and very few studies on developing economies particularly African economies. This research aims to determine bank efficiency and productivity change of Zimbabwean commercial banks. The DEA model was used to measure the efficiency of 10 commercial banks working in Zimbabwe. The intermediation approach was used to specify variables. The average scores of technical efficiency under the Constant Returns to Scale (CRS) and Variable Returns to Scale (VRS) assumptions for the commercial banking sector as a whole are 70.95% and 81.5% respectively. The average scale efficiency for commercial banks operating in Zimbabwe was found to be 73.7%.Through applying the Malmquist Productivity Index (MPI) method; it was found that the mean total factor productivity increase for Zimbabwean commercial banks from 2003 to 2012 is 13.8%. The results also showed that the total factor productivity index peaked in 2009 where it reached a value of 121.1% and reached the lowest point in 2005 were it went down to (-52%).

Services liberalization and productivity of manufacturing firms

AbstractEmploying a unique database of Ukrainian firms in 2001–07, we use the external push for liberalization in the services sector as a source of exogenous variation to identify the effect of services liberalization on total factor productivity (TFP) of manufacturing firms. The results indicate that a standard deviation increase in services liberalization within a firm is associated with a 9.2 percent increase in TFP. The effect is stronger for firms with high productivity, bringing about a reallocation of resources within an industry. Industry‐level results show that the effect of reallocation on industry productivity is almost as strong as the within‐firm effect. The dynamic interaction of services liberalization and TFP through the investment channel reinforces the effect. The effect is robust to different estimation methods and to different sub‐samples of the data. In particular, it is more pronounced for domestic and small firms.

Misallocation and manufacturing TFP in Thailand

Using data from Thailand's 2007 Industrial Census, this research studied resource misallocation across manufacturing plants and its impact on manufacturing total factor productivity (TFP). It is found that there is more resource misallocation across plants in Thailand than in China, India, and the US, as well as in some other countries. When resource misallocation in Thailand is hypothetically reduced to the extent observed in the USA, manufacturing TFP increases by about seventy per cent. It is also found that manufacturing plants under government ownership or located in the northern region of Thailand have lower productivity, yet face lower input and output distortions than other plants. Also, medium‐sized plants face higher distortions than smaller and larger plants.

The Firm-Level Real Effects of Bank-Scope Deregulation: Evidence from the Rise of Universal Banking

Are banks of wide scope better intermediaries? Using the variation in bank scope generated by the stepwise repeal of the Glass-Steagall Act in the U.S. and the subsequent rise of universal banking, we provide evidence that economies of scope in concurrent lending and underwriting improve the access to finance for risky ventures of publicly traded companies. Exploiting a bank-level deregulatory shock, as well as detailed data on bank-firm interactions, we identify increases in sales-growth, stock-return, and option-implied volatilities for universal-bank-financed firms. These firms also exhibit lasting increases in total factor productivity of 3 to 4%, echoed by similar findings for increases of 6 to 7% in capital expenditure and 5 to 9% in market capitalization. Our findings suggest that the facilitation of cross-selling of loans and non-loan products through bank-scope deregulation may have led to an increase in the supply of credit for firms making risky, productivity-increasing investments.