Lower Total Factor Productivity Research Articles

Advancing Green TFP Calculation: A Novel Spatiotemporal Econometric Solow Residual Method and Its Application to China’s Urban Industrial Sectors

The Solow residual method, traditionally pivotal for calculating total factor productivity (TFP), is typically not applied to green TFP calculations due to its exclusion of undesired outputs. Diverging from traditional approaches and other frontier methodologies such as Data Envelopment Analysis (DEA) and Stochastic Frontier Analysis (SFA), this paper integrates undesired outputs and three types of spatial spillover effects into the conventional Solow framework, thereby creating a new spatiotemporal econometric Solow residual method (STE-SRM). Utilizing this novel method, the study computes the industrial green TFPs for 280 Chinese cities from 2003 to 2019, recalculates these TFPs using DEA-SBM and Bayesian SFA for the same cities and periods, and assesses the accuracy of the STE-SRM-derived TFPs through comparative analysis. Additionally, the paper explores the statistical properties of China’s urban industrial green TFPs as derived from the STE-SRM, employing Dagum’s Gini coefficient and spatial convergence analyses. The findings first indicate that by incorporating undesired outputs and spatial spillover into the Solow residual method, green TFPs are computable in alignment with the traditional Solow logic, although the allocation of per capita inputs and undesired outputs hinges on selecting the optimal empirical production function. Second, China’s urban industrial green TFPs, calculated using the STE-SRM with the spatial Durbin model with mixed effects as the optimal model, show that cities like Huangshan, Fangchenggang, and Sanya have notably higher TFPs, whereas Jincheng, Datong, and Taiyuan display lower TFPs. Third, comparisons of China’s urban industrial green TFP calculations reveal that those derived from the STE-SRM demonstrate broader but more concentrated results, while Bayesian SFA results are narrower and less concentrated, and DEA-SBM findings sit between these extremes. Fourth, the study highlights significant spatial heterogeneity in China’s urban industrial green TFPs across different regions—eastern, central, western, and northeast China—with evident sigma convergence across the urban landscape, though absolute beta convergence is significant only in a limited subset of cities and time periods.

New evidence of the driving forces behind Brazil's agricultural TFP growth—A stochastic frontier analysis with climatic variables and land suitability index

AbstractUsing panel data from 510 Brazilian micro‐regions in three census years (1995, 2006 and 2017), this study presents a productivity decomposition for the Brazilian agricultural sector using stochastic production frontier methods that account for the effects of rainfall, temperature and the land suitability index. We also calculated the total factor productivity (TFP) index and decomposed it into technical efficiency, technological change, scale efficiency and environmental efficiency. This article thus provides a new and more realistic assessment of recent Brazilian agricultural productivity growth. In recent decades, Brazilian agriculture has become widely known for presenting fast productivity growth; however, our results suggest that a lower TFP growth rate than previous estimates (1.96% per annum) and the overall effects of climate change could potentially compromise Brazilian agricultural TFP growth in the long run. Our findings might thus generate insights for agricultural and regional policies to increase efficiency in the sector and promote sustainable agricultural development in Brazil, which will contribute to the sector's competitiveness in international markets, the country's social and economic welfare, and environmental conservancy.

Allocation of decision‐making power and labour income share in listed companies: Evidence from China

AbstractThis paper utilises the perspective of listed companies to explore the influence of decision‐making power allocation on labour income share and analyses the possible mechanisms. Utilising 16,650 firm‐year observations from both the Shenzhen and Shanghai stock exchanges between 2008 and 2021, the results show that decentralised decision‐making power can significantly improve the labour income share of enterprises. This result is more obvious in enterprises with non‐state‐owned property rights and low total factor productivity. Furthermore, decentralising enterprise decision‐making power reduces rent dissipation within the company, improves enterprise investment enthusiasm, increases investment in research and development, and promotes upgrading the labour force.

Total factor productivity of Russian companies: Assessments, trends, and dynamic factors

The article presents the results of the analysis of total factor productivity( TFP) of Russian companies across eight industries — agriculture, extraction, processing, energy, water supply, trade, transportation, and information and communication — during the period of 2012 to 2020. Over this timeframe, there was an observable trend of decreasing TFP among Russian companies cumulatively. Sector-specific analysis reveals an upward TFP trend in agriculture, extraction, and trade sectors, while in information and communication, the metric remained virtually unchanged. Almost across all sectors, except for information and communication, private companies exhibited lower TFP compared to stateowned enterprises (SOEs) with direct government ownership. Furthermore, in the extraction sector, SOEs demonstrated higher TFP than private organizations. However, the TFP of medium and small private companies proved to be higher across all sectors, excluding agriculture and extraction. Additionally, it was found that both private companies and SOEs with direct government ownership lagged behind the productivity of SOEs with indirect government ownership, except for the extraction sector, where these distinctions were negligible

How Does the Digital Economy Drive High-Quality Regional Development? New Evidence From China

The digital economy, which boasts general technology, intense penetration, platform ecology, and low marginal cost, is a product of advanced digital technology. This new engine has become a driving force for high-quality economic development. From the three aspects of development momentum, efficiency, and structure, this paper profoundly explores internal mechanisms to lead the high-quality growth of the regional economy. By constructing an econometric model, the influence effect and means of the digital economy on the high-quality development of the regional economy are empirically tested. The digital economy and its three sub-dimensions can significantly promote the high-quality development of the regional economy. However, industrial digitalization has the most vital role in promoting it. The digital economy has shown a more vital promotion role in the central and western regions and provinces with low total factor productivity, and it can indirectly impact high-quality economic development by promoting dynamic, efficient, and structural changes.

The growing impact of ICT productivity via the cost of capital: Evidence from the U.S. and Japan

We identify and measure two impacts of industry-level total factor productivity (TFP) growth on aggregate price change in the U.S. and Japan. The first is a standard effect from the definition of aggregate GDP. TFP change lowers aggregate prices ceteris paribus. The second is that a change in TFP in the production of investment goods lowers the cost of capital via lower investment prices. We call this the cost-of-capital effect and formulate an expanded growth accounting framework to capture both effects. We apply it to a harmonized dataset for the two countries and find that the standard effect has fallen since the peak around 2000 due to lower TFP growth and a diminished share of GDP. However, the cost-of-capital effect has risen in importance and offsets part of this decline in the standard effect.

Commodity terms of trade volatility and industry growth

The rising volatility of commodity terms of trade (CTOT) is associated with a high cost of capital and a low credit supply for producers in commodity-dependent countries. In this paper, we examine how volatile CTOT influences various industries’ growth performance based on sector-level panel data for countries specializing in commodity exports. We find robust evidence that CTOT volatility causes a more significant growth loss in manufacturing sectors facing tighter credit constraints. The adverse growth effects operate through lower total factor productivity in industries heavily reliant on external finance for long-term investments and through lower capital accumulation in industries with high liquidity needs for short-term working capital. Our findings offer a complementary explanation for the “resource curse” through the credit constraint channel.

How to Escape the Middle-Income Trap: Lessons for the ODA Policy

Despite the effort of official development assistance (ODA) since 1948, most of the countries experience decreasing marginal returns in the economic growth, resulting in middle-income trap. In the perspective that there must be an alternative ODA policy target to neo-classical economic theory, this study examines the configurations of economic and institutional factors that help the escape of middle-income trap. Previous middle-income trap studies investigated the slowdown of economic growth as a consequence of low total factor productivity and showed limited interest on institutional factors. Moreover, such studies based on regression could not draw the synergy of various factors. This study employed fuzzy-set qualitative comparative analysis to identify the combinations of economic and institutional factors that improve or reduce the possibility of the escape. The results suggest that while the overwhelming importance of total factor productivity still remains, configuration of institutional factors such as rule of law, property rights, anti-corruption, democratic institution is necessary to achieve the full escape of middle-income trap. The findings imply the need for not only financial aid but also institutional support for the developing countries to overcome the middle-income trap.

Total factor productivity growth in livestock production in Botswana: what is the role of scale and mix efficiency change in beef production?

ABSTRACT It is well established that improving livestock productivity has the potential to boost food security, income, and employment for rural communities. While the technical efficiency of the livestock sector has been extensively studied in both developing and developed countries, few studies have analysed total factor productivity (TFP) and its components (technical change, technical, scale, and mix efficiency changes). To fill this gap this study specifically analyses the TFP growth of 26 beef cattle producing districts in Botswana using the Färe-Primont index. This index does not only allow us to understand how TFP varies amongst the districts but also how it has changed over time (between 2007 and 2014) as well as examining what has been driving that change. We also employ a feasible generalised least squares estimator for panel data to identify sources of productivity and efficiency growth. Results show that livestock TFP increased during the study period, and that this was driven by technological change, whilst efficiency change (TFPE) decreased. Further, we found that the decline in scale-and mix efficiency change (OSME) was largely responsible for the slowdown of TFPE, with a relatively smaller decline in technical efficiency change (OTE) also contributing. Districts with foot and mouth disease (FMD) outbreaks and restricted access to export markets had lower TFP growth whilst proximity to livestock advisory centres (LAC), off-farm income, education and herd size were shown to enhance productivity and efficiency growth.

The relationship between decentralization and economic growth across regimes

Panel smooth transition regression (PSTR) is applied to obtain thresholds in certain variables to classify the regions into regimes (high or low). Data for the regions of Spain over the period 1986–2010 are used. In general, the results point to a positive (negative) relationship between fiscal (administrative) decentralization and economic growth in regions with low public infrastructure stock per efficient worker and high human capital per worker. In addition, in regions with low (high) total factor productivity, expenditure (revenue) decentralization is positively (negatively) correlated with economic growth. The results are fairly robust to different specifications and estimation methods.

OIL RENTS, INSTITUTIONAL DEVELOPMENT, AND TOTAL FACTOR PRODUCTIVITY

This paper investigates the determinants of total factor productivity (TFP) using a panel data model involving 15 petroleum exporting countries during the period 2008-2019. The econometric evidence, based on the Arellano-Bond generalized method of moments, shows that: 1) education raises TFP, which suggests that highly qualified workers are more able to develop new technologies and absorb existing technologies, 2) oil rents lower TFP, which is consistent with the natural resource curse (NRC) hypothesis and, therefore, with the view that rent-seeking and corruption prevent some oil-rich nations from prospering, and 3) the interaction term involving oil rents and institutional development yields a positive effect on TFP, which means that imposing the rule of law, eradicating corruption and improving regulatory quality can effectively contribute to reversing the negative effect of oil abundance on TFP.

Oil price uncertainty and enterprise total factor productivity: Evidence from China

Global oil price uncertainty may affect the enterprise total factor productivity (TFP). Considering the unbalanced relationship between the rapid growth in the Chinese economy and its relatively low TFP and China is the largest net oil importer, this paper employs the SYS-GMM to effectively analyze the impact of oil price uncertainty on Chinese enterprise TFP, as well as its mechanism. Based on firm-level data of listed Chinese enterprises from 2010 to 2019, we find significant evidence that oil price shocks have a detrimental influence on enterprise TFP. This influence is mediated by technical innovation and resource allocation. Heterogeneity analysis reveals that oil price uncertainty has a stronger negative impact on enterprise TFP state-owned firms, or firms in small businesses, secondary industries, northeastern heavy industries, low-competition sectors, and regions where marketization is sluggish. Moreover, when the control of retail oil prices is eased, the negative impact becomes more evident. Our findings can provide advice on policies or to researchers regarding the considerable uncertainty of energy prices and increasingly importance of TFP.

How do environmental regulations influence resource misallocation in China? The role of investment flows

AbstractIn recent years, the Chinese government has implemented numerous regulations to address environmental deterioration. Several studies have examined the effect of environmental regulation policies on China's economic performance. However, whether environmental regulations can alleviate China's resource misallocation problem—a critical issue in transitional economies—remains unclear. This study fills this gap in the literature by employing the difference‐in‐differences method to examine how environmental regulations affect resource misallocation. We found that stringent environmental regulations have reduced the extent of resource misallocation in China, with resource reallocation being the driving force behind this improvement. The emission reduction mandate reduces investment inflows and hinders firms' entry into regions with low total factor productivity, while directing the flow of resources to highly productive areas.

Causes and Determinants of Manufacturing Value-added (MVA) Share Development in Ethiopia

Industrialization is not only a prerequisite for increasing an economy's competitiveness and living standards, but it is also required for developing economies to catch up to more developed. However, Ethiopia's average performance over the last four decades has been rather unsatisfactory, with MVA accounting for 5.6 % of GDP. The overarching goal of this article is to investigate the fundamental reasons why manufacturing has historically played such a minor role in Ethiopia's economy. It has also looked into the determinants factors that influence MVA. The study reviewed both theoretical and empirical literature. It used tables and figures to conduct descriptive, and the residual of the approximate Cobb-Douglas production function for total factor productivity (TFP) analyses. To estimate determinant factors, the autoregressive distributive lag (ARDL) model was used for time series data. The study identified key reasons and determinants that limit MVA share. Volatile political environments, the tendency of major fabrication subsectors to decline, TFP remaining small and stagnant, and others. According to the empirical study, in the long run, gross domestic product (GDP) per capita and foreign direct investment (FDI) variables have shown a significant positive association, whereas the real exchange rate index has a negative correlation with MVA. While, in the short run, the later variables, and manufacturing imports have a positive significant impact.. The findings have policy implications such as proper policy design and stable implementation, avoiding premature deindustrialization, improving low TFP, attracting large-scale FDI, and increasing GDP per capita income, among other things Keywords: Manufacturing Value-added; Causes; Determinants; ARDL; Ethiopia DOI: 10.7176/IEL/12-2-04 Publication date: May 31 st 2022

Income convergence of Indian states in the post-reform period: evidence from panel stationarity tests with smooth structural breaks

This paper investigates income convergence of Indian states in the post-reform period when markets played a greater role in resource allocation. We analyze stochastic convergence of relative per capita incomes of 19 states for the period 1994–2018 by employing a recently developed panel data approach controlling for structural breaks as smooth shifts. Smooth shifts are modelled using a more flexible Fourier approach that does not require identifying the number, date, and form of breaks. The empirical results, contrary to recent empirical findings, do not support evidence in favour of convergence in per capita income among Indian states. Poor infrastructure, lack of adequate financial development, and weak governance structure coupled with low total factor productivity growth seem to be responsible for the divergence of income. The findings suggest that development intervention in the post-reform period has neither been of the required order nor in the desired direction to help the lagging states to catch up with the leading ones.

RETRACTED ARTICLE: Performance assessment of peanut production in China

This article has been retracted from publication in the Taylor & Francis journal, Acta Agriculturae Scandinavica, Section B — Soil & Plant Science. Following publication, concerns were raised by multiple third-parties around the content of the special issue and the decision-making process. Following an investigation by the Taylor & Francis Publishing Ethics & Integrity team in full cooperation with the Editor-in-Chief, it was confirmed that this article included in Special Issue titled “ Envisage Computer Modelling and Statistics for Agriculture”, guest edited by Gunasekaran Manogaran was not peer-reviewed appropriately, in line with the Journal's peer review standards and policy. As the stringency of the peer review process is core to the integrity of the publication process, the Editor and Publisher have decided to retract all of the articles within the above-named Special Issue. The journal has not confirmed if the authors were aware of this compromised peer review process. The journal is committed to correcting the scientific record and will fully cooperate with any institutional investigations into this matter. The authors have been informed of this decision. We have been informed in our decision-making by our policy on publishing ethics and integrity and the COPE guidelines.

Firm performance and economic development: Evidence from a unique dataset of China

AbstractUsing a unique firm‐level dataset from 2007 to 2015, we investigated the characteristics and trends of China's economic development from the perspective of firm performance. We found that China's economic development in the recent decade has made the following achievements: less reliance on investment for growth, enterprises’ deleveraging, a more competitive market environment and improvement in labour income distribution. Yet, it still faced severe challenges, such as increasing tax and fee burdens, high employment pressure, low total factor productivity (TFP) growth rate, and how to realize the coordinated development of the economy and environment.

Deregulation of Market Access and De-capacity of Supply Side：A Quasi-natural Experiment Based on the Negative List System Pilot

Most of the existing literature focuses on the measurement, causes and economic consequences of overcapacity, with little attention paid to how to cut capacity and its effects. Using the DID research method, this paper explores the impact of negative list for market access on overcapacity from the supply side of the real economy reform. The results show that: （1）Compared with companies which are not affected by the negative list system pilot, companies affected by the negative list system pilot have significantly lower excess capacity, and the conclusion is still robust after the balance trend test, PSM test, independent variable replacement test, falsification test etc.（2）Channel testing shows that the implementation of the negative list for market access mainly reduces the overcapacity of companies by optimizing the allocation of production factors and the business environment, streamlining administration, delegating power, and giving the market a bigger role play in allocating resources and promoting competition.（3）Further analysis shows that the effect of the negative list system on companies’ excess capacity is mainly reflected in low total factor productivity, high degree of excess capacity, pollution industry and large-scale groups.This paper may have the following contributions: （1）It enriches the empirical research in the field of capacity. The existing literature pays more attention to the measurement of overcapacity from the demand side（Han, et al., 2011; Zhang and Jiang, 2017; Yu, et al., 2018）, and causes and economic consequences（Lin, et al., 2010; Jiang, et al., 2012; Yu and Lu, 2015）. There is still a lack of literature on how to eliminate capacity and whether the relevant policies achieve the effect of eliminating capacity from supply-side reform. From the perspective of the supply-side reform of the real economy, this paper for the first time discusses the impact of market access deregulation on excess capacity.（2）As for the measurement of excess capacity, the existing literature commonly uses the peak method, production function method, cost function method and data envelopment analysis method to measure the capacity utilization rate（Klein and Summers, 1966; Garofalo and Malhotra, 1997; Shen, 1999; Sun, et al., 2009）. However, some variables and data are difficult to obtain for listed companies using those methods. This paper uses the stochastic frontier model to estimate the stock level of excess capacity（Aretz and Pope, 2018）, which can solve the above problems better.（3）To the current knowledge of us, this paper fills the gap in the research field of the negative list system and excess capacity of listed companies, which enriches the relevant literature on the implementation effect of the market negative list system from the perspective of supply side.

Does air pollution matter in a supplier's trade credit strategy? Evidence from an emerging market

This study analyzes the impact of air pollution on the city in which customers are located on the trade credit strategy of their suppliers. Following the framework of environmental stress theory, we hypothesize that suppliers change their trade credit strategy to grant less trade credit to their customers located in cities with severe air pollution. Our findings are consistent with our hypothesis. We find that the adverse effects of air pollution occur through financial constraints, operating risk, and customers' default risk, corroborating the underlying logic of our proposed hypothesis. Additional analyses suggest that changes in a supplier's trade credit are more pronounced when a customer is in a polluting industry, has low total factor productivity, receives fewer government subsidies, has fewer bank loans, is far from its suppliers, and has poor inventory management.

Wage growth and firm performance: Case of Japan

Utilizing a panel dataset of firms from 1994–2015, we estimated the per hour wage growth ratio function determined by firm performance. We observed that firms’ productivity growth and profitability positively affected the hourly wage growth ratio. In addition, except for the Japanese midterm boom from 2005 to 2007, firm size decreased per hour wage growth. The results indicated that large firms tend to curb pay wages by hiring irregular employment. By considering recent total factor productivity (TFP) growth stagnation, low TFP growth caused stagnation in hourly wage growth. After Abenomics, the profit margin rose. Thus, recent firms’ profit environment improvement contributed to hourly wage growth.