Manufacturing Productivity Growth Research Articles

The link between firm-level innovation and aggregate productivity growth: a cross-country examination

This paper investigates whether failure in innovation at the firm level can account for cross-country heterogeneity in manufacturing productivity growth. There is no strong evidence in the literature on the existence of such link. Our work, however, differs in a number of ways from much of the previous cross-country comparisons on the relationship between innovation and productivity using firm-level data. First, a broader definition of innovation input is used in which research and development is one of several sources of innovation. Second, a quantitative innovation output measure is used in the analysis. Third, the analysis is based on larger and more representative samples of firms including small firms. Finally, an econometric framework based on the knowledge production function accounting for both selectivity and simultaneity bias is employed. The results from Nordic countries show that given difficulties in pooling the data, it is important to specify country-specific models accounting for country-specific effects and differences in the countries national innovation systems.

Trade liberalization and productivity growth in latin american manufacturing, 1970–98

Trade liberalization and productivity growth in latin american manufacturing, 1970–98

Economic Liberalization and Productivity Growth: Further Evidence From Bangladesh

The impact of economic liberalization reforms on the productive performances of manufacturing firms remains a contentious issue in the literature. This paper attempts to contribute to the debate by empirically estimating productivity growth of Bangladesh food manufacturing using firm level data before and after reform. Empirical results show that the share of output growth was accounted for by input growth in most sectors of this industry. In some sectors, the estimated rate of total factor productivity (TFP) growth is negligible or even negative. Decomposition of the TFP growth shows that technological progress plays a significant role in TFP growth across firms within the sub-sectors of this industry. Empirical results also show that the relative contribution of capacity realization to TFP growth is not substantial in inhibiting the industry's high and sustained growth. These dismal performances indicate that the industries responded a little to the implementation of economic reforms.

Productivity Growth, Efficiency and Outsourcing in Manufacturing and Service Industries

This paper is a survey of recent contributions to, and developments of, the relationship between outsourcing, efficiency and productivity growth in manufacturing and services. The objective is to provide a thorough and up–to–date survey that provides a significant discussion on data, as well as on the core methods of measuring efficiency and productivity. First, the readers are introduced to the measurement of partial and total factor productivity growth. Different parametric and non–parametric approaches to the productivity measurement in the context of static, dynamic and firm–specific modelling are discussed. Second, we survey the econometric approach to efficiency analysis. The issues of modelling, distributional assumptions and estimation methods are discussed assuming that cross–sectional or panel data are available. Third, the relationship between outsourcing and productivity growth in manufacturing and services is discussed. The correspondence between a number of hypotheses and empirical findings are examined. Examples of varieties of relevant empirical applications, their findings and implications are presented. Fourth, measurement of inputs and outputs in manufacturing and services are discussed. Finally, to promote useful research, a number of factors important to the analysis of outsourcing, efficiency and productivity growth in the service sector are summarised.

Why Did UK Manufacturing Productivity Growth Slow Down in the 1970s and Speed Up in the 1980s?

After a dramatic slowdown in the 1970s, productivity growth in UK manufacturing in the 1980s returned to something like its pre‐slowdown trend. This paper constructs a quarterly dynamic model of total factor productivity growth in UK manufacturing using cointegration techniques, correcting for a variety of measurement biases. The elasticity of output with respect to R&D capital is estimated at between 0.2 and 0.3, with human capital playing a positive and significant role. The paper also determines how much of the UK productivity slowdown in the 1970s was due to the mis‐measurement of output and the business cycle and how much was due to structural changes. The answer appears to be about half and half.

Why Did UK Manufacturing Productivity Growth Slow Down in the 1970s and Speed Up in the 1980s?

After a dramatic slowdown of the 1970s, productivity growth in UK manufacturing in the 1980s returned to something like its pre-slowdown trend. This paper constructs a quarterly dynamic model of TFP growth in UK manufacturing using cointegration techniques, correcting for a variety of measurement biases. The elasticity of output with respect to R&D capital is estimated at between 0.2 and 0.3, with human capital also playing a positive and significant role. The paper also determines how much of the UK productivity slowdown in the 1970s was due to the mis-measurement of output and the business cycle and how much was due to structural changes. The answer appears to be about half and half.

Foreign ownership and productivity dynamics

In analyzing the distinctive contributions of foreign subsidiaries and domestic firms to productivity growth in Belgian manufacturing, this paper shows that foreign ownership is an important source of firm heterogeneity affecting productivity dynamics. Foreign firms are found to have contributed disproportionately to aggregate productivity growth while reallocation processes are reported to be significantly different among foreign subsidiaries and domestic firms.

Productivity growth in the large-scale manufacturing of Greece: a non parametric approach

The paper measures and decomposes Total Factor Productivity (TFP) growth in Greek manufacturing for the period 1975–96 using the non parametric Malmquist productivity change index. The average rate of TFP growth for the sector as a whole was 1.8 percent per annum, although considerable differences existed in this respect among the various industrial groups. Technical change appeared to be the major determinant of TFP growth while the role of technical efficiency changes was limited. Evidence of Hicks input non neutral technical change was found for certain industries. Scale inefficiency in many cases was associated with operation at a sub–optimal scale.

Productivity Trends in India's Manufacturing Sectors in the Last Two Decades

Starting in the late 1970s, the Indian authorities implemented a series of reforms aimed at exposing the economy to greater competition and at liberalizing key aspects of economic activity. This paper investigates productivity trends in India's (registered) manufacturing sectors during the 1980s and 1990s. The main findings of the paper are (i) labor and total factor productivity (TFP) growth in total manufacturing and many of the component sectors since 1980 were markedly higher than that in the preceding two decades, although the extent of the acceleration in TFP growth depends critically on the underlying assumptions about factor elasticities and the assumed structure of the production function; (ii) productivity growth for total manufacturing as well as for many subsectors picked up further after the 1991 reforms; and (iii) classification of the best performing sectors and the weakest performing sectors, based on comparative TFP, remains robust to changes in underlying assumptions.

Productivity Trends in India's Manufacturing Sectors in the Last Two Decades

Starting in the late 1970s, the Indian authorities implemented a series of reforms aimed at exposing the economy to greater competition and at liberalizing key aspects of economic activity. This paper investigates productivity trends in India's (registered) manufacturing sectors during the 1980s and 1990s. The main findings of the paper are (i) labor and total factor productivity (TFP) growth in total manufacturing and many of the component sectors since 1980 were markedly higher than that in the preceding two decades, although the extent of the acceleration in TFP growth depends critically on the underlying assumptions about factor elasticities and the assumed structure of the production function; (ii) productivity growth for total manufacturing as well as for many subsectors picked up further after the 1991 reforms; and (iii) classification of the best performing sectors and the weakest performing sectors, based on comparative TFP, remains robust to changes in underlying assumptions.

Manufacturing Productivity Growth across European Union States: 1978 – 94

This paper explores the sources of rising manufacturing output and labour productivity across thirteen European Union states between 1978 and 1994. Despite the severe deindustrialisation trends of the past two decades, manufacturing output continued to expand and thus contribute to overall economic growth. The analysis here reveals several key aspects of this process. First, the geographical distribution of the sector across Europe for the entire period is characterised by considerable stability. Contrary to some initial fears, the slow but steady integration process has not led to the wholesale migration of manufacturing activity from one member state to another. Second, total factor productivity increases seem to account for most of the recorded output and labour productivity gains. Third, there is, however, significant spatial variation in the performance of individual industrial bases. Smaller countries' growth rates appear to surpass those of the larger states, and the European South demonstrates higher growth rates than the North. Nevertheless, and this is the final point, there is an absence of clear signs of convergence. Geographical inequalities continue to hold, as the technology gap between advanced and lagging economies remains as wide as ever. Such findings raise some important issues about the role of EU regional policies and the challenges that they face at the dawn of the 21st century.

Accounting for Air Pollution Emissions in Measures of State Manufacturing Productivity Growth

A Malmquist‐Luenberger productivity index is employed to account for both marketed output and the output of pollution abatement activities of U.S. state manufacturing sectors for –1986. The index allows us to decompose the change in productivity into measures of change in efficiency and technical change. By accounting for the change in emissions, average annual productivity growth is 3.6 percent, whereas it is 1.7 percent when emissions are ignored. We also find adjusted productivity growth improved after 1977, and “Frost Belt” states with rapidly growing manufacturing sectors have significantly higher rates of productivity growth than “Sun Belt” states with slow growing manufacturing sectors.

Imperfect Competition, Returns To Scale and Productivity Growth In Australian Manufacturing: A Smooth Transition Approach To Trade Liberalisation

This Paper examines the relationship between trade liberalization and productivity growth for Australian manufacturing. An imperfect competition, non-CRS, smooth transition empirical framework is employed for analysis. GMM estimates of the logistic smooth transition model imply that trade reform impacts take approximately four years to complete, but do not occur over the same time period for all industries. In response to trade reforms, for most industries a significant improvement in productivity is estimated, these improvements are associated with lower mark-ups and falling scale parameters. A minority of industries however, experienced no change or falling productivity growth in response to reforms, these industries tended to have the highest absolute protection levels. [D24, F12, C52, L60]

Productivity growth in British manufacturing: spatial variation in the role of scale economies, technological growth and industrial structure

This paper investigates the role of scale economies, technological growth and industrial structure in creating spatial variation in manufacturing labour and Total Factor (TFP) productivity in Britain. Separate estimates of a translog specification are presented for British manufacturing firms located in defined areas of the country over the period 1994–1998. The results show that TFP change due to scale economies and technological growth has been of much less important in influencing the output growth of manufacturing firms than input growth or industrial structure. Regarding the components of TFP, technological growth has been the dominant force at play. The analysis of average labour productivity identifies shifts to other factors of production and industrial structure as being the main determinants of change, scale economies appear to have had a marginal role. The results identify spatial patterns indicating that more favourable locational effects arise for firms in areas adjacent to large urban centres, rather than for those located within cities, on the extreme periphery of the urban hinterland, or in rural areas and smaller towns.

Productivity growth in British manufacturing: spatial variation in the role of scale economies, technological growth and industrial structure

Productivity growth in British manufacturing: spatial variation in the role of scale economies, technological growth and industrial structure

Theoretical economic geography and spatial econometrics: dynamic perspectives

Theoretical economic geography has received significant new impetus from so-called 'new economic geography' theory, and this provides the basis of the spatial econometric model developed in this paper. The model, which is seen as part of an attempt to bridge the gap that presently exists between this new body of theory and reality, is fitted using 3SLS to data on manufacturing productivity growth data for 178 regions of the EU covering the periods 1975-81, 1981-89, 1989-95. The resulting estimates point to the continued existence over time of increasing returns, and thus provides support for one of the main tenets of new economic geography theory. The results also highlight urbanization, peripherality, the initial level of technology and across-region spillovers as determinants of regional productivity growth variations, operating via the rate of technical progress and labour efficiency variations. There is no evidence that these variables are diminishing in significance systematically over time, leading to the conclusion that spatial polarization in productivity will persist. The paper points to the need for further testing of fundamental assumptions of the underlying theory, and for developments in the theory to accommodate interdependence between model parameters and the socio-economic context within which the process is operating.

Productivity Growth and Pollution in State Manufacturing

The directional output distance function (Chambers, Chung, & Fare, 1996) is used to construct a Malmquist-Luenberger index of total factor productivity growth for manufacturing when both good and bad outputs are jointly produced. The index is constructed using information on good and bad output quantities and input quantities, circumventing the problem of recovering shadow price information for the bad output needed for the Fisher or Tornqvist type of productivity indices. Accounting for toxic releases in manufacturing, productivity growth averages 1.4% an-nually during 1988–1994. The findings also suggest that the failure to account for toxic releases in manufacturing results in a significant under-statement of total factor productivity growth.

Equilibrium and Economic Growth: Spatial Econometric Models and Simulations

Neoclassical theory assumes diminishing returns to capital and spatially constant exogenously‐determined technological progress, although it is questionable whether these are realistic assumptions for modeling manufacturing productivity growth variations across European Union (E.U.) regions. In contrast, the model developed in this paper assumes increasing returns and spatially varying technical progress, and is linked to endogenous growth theory and particularly to ‘new economic geography’ theory. Simulations, involving 178 E.U.regions, show that productivity levels and growth rates are higher in all E.U. regions when the financially assisted (Objective 1) regions have faster output growth. This also reduces inequalities in levels of technology. Allowing the core regions to grow faster has a similar effect of raising productivity growth rates across the E.U., although inequality increases. Thus, the simulations are seen as an attempt to develop a type of ‘computable geographical equilibrium’ model which, as suggested by Fujita, Krugman, and Venables (1999), is the way theoretical economic geography needs to evolve in order to become a predictive discipline.

Understanding ‘The Essential Fact about Capitalism’: Markets, Competition and Creative Destruction

This paper examines two ways in which competition works in modern capitalist economies to improve productivity. The first is through incentives: encouraging improvements in technology, organisation and effort on the part of existing establishments and firms. The second is through selection: replacing less-productive with more productive establishments and firms, whether smoothly via the transfer of market shares from less to more productive firms, or roughly through the exit of some firms and the entry of others. We report evidence from the UK suggesting that selection is responsible for a large proportion of aggregate productivity growth in manufacturing, and that much of this is due in turn to selection between plants belonging to multi-plant firms. We also investigate whether the nature of the selection process varies across the business cycle and report evidence suggesting that it is less effective in booms and recessions. Finally, although in principle productivity catch-up by low-income countries ought to be easier than innovation at the frontier, in the absence of a well functioning competitive infrastructure (a predicament that characterises many poor countries), selection may be associated with much more turbulence and a lower rate of productivity growth than in relatively prosperous societies. We report results of a survey of firms in transition economies suggesting that, particularly in the former Soviet states (excluding the Baltic states), poor output and productivity performance has not been due to an unwillingness on the part of firms to change and adapt. On the contrary, there has been a great deal of restructuring, much new entry and large reallocations of output between firms; but such activity has been much more weakly associated with improved performance than we would expect in established market economies.

Outsourcing of Services and the Productivity Recovery in U.S. Manufacturing in the 1980s and 1990s

Manufacturing productivity growth recovered during the 1980s and 1990s, while other sectors, particularly services, did not. In the same period U.S. manufacturing has engaged in the “outsourcing” or “contracting-out” of service functions. Has the recovery of manufacturing been accomplished by industrial reorganization--sloughing off sluggish services--rather than technical progress? We analyze this question by reducing service inputs to their consituent elements of material inputs. Service productivity growth is thus imputed to the goods sectors, reducing the recovery of manufacturing productivity growth in the 1980s by one fifth. The recovery lasted through the 1990s, when high productivity performers in manufacturing have been relatively successful at outsourcing sluggishservices.