Output Elasticity Research Articles

Driving force for China’s photovoltaic industry output growth: Factor-driven or technological innovation-driven?

At present, China’s PV industry is experiencing a policy-driven to market-driven transition. Whether the endogenous driving force for China’s PV industry output growth has been changed is a question of substantial concern? To scientifically answer the question of the endogenous driving force of the output growth of China’s PV industry, we empirically analyse the driving force of China’s PV industry output growth by constructing an expanded Cobb-Douglas technology production function. The results demonstrate that the output elasticity of research and development (R&D) is between 0.13 and 0.18, which is higher than the level of 0.1 in traditional Chinese manufacturing. Compared with traditional industries, PV industries are more capable of translating their R&D inputs into output revenue; The contribution rate of R&D input to output growth exceeds physical capital and labour factors, indicating that the endogenous driving force of China’s PV industry output growth has changed from factor-driven to technological innovation-driven.

Wheat Crop Cultivation's Profitability Studies in Sugar Crop Dominated Areas

The study was conducted at Arid Zone Research Centre (AZRC), Dera Ismail Khan (D.I.Khan) to evaluate cost and benefit of wheat cultivation in district Dera Ismail Khan, Khyber Paktoon Khwa province of Pakistan during 2015. The basic underlying assumption of economic analysis of wheat production was to assess the farmers/growers financial impact of wheat cultivation. A sample of 200 respondents from 10 major wheat growing villages of the respective areas of the district was interviewed through pretested questionnaire. The study revealed that the cost of wheat production was Rs=35,680 per acres, whereas output comes 1650 Kg per acre (42 mounds) amounting Rs=63,600 per acre. Farmers' margin also rises by adding the value of family labour and owned land which is sufficient to sustain a normal family. Moreover, positive influence between return price and output of wheat was concluded from the study, whereas negative effect of cost was also observed. The output elasticity of Land Preparation (LP), Seed and Sowing (SS), Farm Inputs (FI), Irrigation (Irr), Pesticides (Pest) and Harvesting/Threshing (HT) are 0.124587, 0.31244, 0.5874, 0.55461, 0.08248 and 0.65743, respectively.

How technological progress affects input substitution and energy efficiency in China: A case of the non-ferrous metals industry

Technological progress leads to factor shares change by changing the marginal productivity of factors or the substitution elasticity between factors. This is a key energy issue affecting total factor energy performance. The study used data from 1980 to 2016 of China’s non-ferrous metals industry (CNMI). In the first part, the paper employs ridge regression to study the substitution effect and technological progress difference among factor inputs. Second, the paper analyzed the impact of technical indexes on energy performance by using the Data Envelopment Approach (DEA)-Malmquist framework. The results show a higher output elasticity of labor (0.300–0.451) than that of energy (0.289–0.403) and capital (0.230–0.346). China’s non-ferrous metals industry shows labor-biased technological progress. The results indicate the existence of mutual substitution relations among the three factors. The substitution elasticity among input factors shows a convergence trend. The substitution elasticity between labor and energy (1.062–1.199) emerge as the highest. This is followed by the substitution elasticity of energy for capital. In addition, the technological progress difference between the three inputs become smaller gradually. Whether from the national average or regions, energy performance has improved significantly, which benefits from the impact of technological progress and changes technical efficiency.

Does high debt ratio influence Chinese firms’ performance? A semiparametric stochastic frontier approach with zero inefficiency

The excessive debt ratio of Chinese firms has raised concerns over its impact on productive efficiency. We employ a firm-level dataset over 1998–2007 to investigate the role of debt in the firm’s production frontier and technical efficiency. The impact of debt on frontier is decomposed into a stand-alone neutral effect and indirect non-neutral effects, which alter the output elasticity of production inputs. We estimate the effects through a semiparametric smooth coefficient stochastic frontier model. We allow a nonzero probability for the firms to be fully efficient and model it as a function of debt and technical progress represented by time. We observe that an increase in debt significantly shifts firms’ frontier downward across different ownerships, regions, and industries. Foreign and private firms are more efficient, with their full efficiency probability increased by debt and technical progress. By contrast, state-owned enterprises and collective firms are much less efficient and their probability of being fully efficient does not increase with more debt. Furthermore, lower efficiency levels are concentrated in the central and western regions and in the mining and public utility industries.

Malthus in the light of climate change

Abstract To reconsider the Malthusian predictions of natural limits to economic development, the paper develops a multi-sector growth model with exhaustible resource extraction, investments in physical and knowledge capital, climate change, and endogenous fertility. Economic growth is driven by endogenous innovations which increase in the availability and productivity of research labour. Poor substitution of natural resources triggers sectoral change. Climate change is the result of polluting resource use which is, like consumption and investments, based on the intertemporal optimization of the households. Highlighting the importance of bounded resource supply and of rational extraction decisions I show that climate change is independent of population growth in steady state and there is no causal relationship between climate and population during transition to steady state. The consumption per capita growth rate rises in the innovation rate and the output elasticities of labour and capital in the different sectors. Unlike climate policy, population policy is not warranted; it may be counterproductive because labour is crucial for the research sector.

Should We Be Puzzled by Forward Guidance?

Although a growing literature argues output is too sensitive to future interest rates in standard macroeconomic models, little empirical evidence has been put forth to evaluate this claim. In this paper, we use a range of vector autoregression models to answer the central question of how much output responds to changes in interest rate expectations following a monetary policy shock. Despite distinct identification strategies and sample periods, we find surprising agreement regarding this elasticity across empirical models. We then show that in a standard model of nominal rigidity estimated using impulse response matching, forward guidance shocks produce an elasticity of output with respect to expected interest rates similar to our empirical estimates. Our results suggest that standard macroeconomic models do not overstate the observed sensitivity of output to expected interest rates.

Should We Be Puzzled by Forward Guidance?

Although a growing literature argues output is too sensitive to future interest rates in standard macroeconomic models, little empirical evidence has been put forth to evaluate this claim. In this paper, we use a range of vector autoregression models to answer the central question of how much output responds to changes in interest rate expectations following a monetary policy shock. Despite distinct identification strategies and sample periods, we find surprising agreement regarding this elasticity across empirical models. We then show that in a standard model of nominal rigidity estimated using impulse response matching, forward guidance shocks produce an elasticity of output with respect to expected interest rates similar to our empirical estimates. Our results suggest that standard macroeconomic models do not overstate the observed sensitivity of output to expected interest rates.

Welfare Multiplier of Public Investment

We analyze the welfare multipliers of public spending—the consumption equivalent change in welfare for a one dollar change in public spending—in a DSGE model. The welfare multiplier of public investment depends crucially not only on the productivity (output elasticity) of public capital, as shown by earlier studies, but also on the depreciation rate of public capital and the efficiency of public investment defined as a fraction of public investment spending that translates into the public capital stock. When the key parameter values are set based on the empirical estimates for advanced economies and the output multipliers are consistent with the empirical estimates, the welfare multiplier is positive and sizable. The welfare multiplier is roughly zero when the key parameter values are set to match the features of developing economies. A public infrastructure push in advanced economies makes sense, but developing economies should enhance the efficiency and productivity of public investment.

Measurement errors in agricultural data and their implications on marginal returns to modern agricultural inputs

AbstractThe low uptake of modern agricultural technologies in sub‐Saharan African countries has encouraged researchers to revisit the returns to (or profitability of) these agricultural inputs. A related strand of literature is exploring the allocative efficiency of these factors of production in African agriculture. However, all these studies rely on self‐reported agricultural data, which are prone to nonclassical measurement errors, the errors in these data are correlated with the true values of variables of interest. In this article we investigate the implication of measurement errors in self‐reported agricultural input and production data on marginal returns to these modern agricultural inputs. We consider a generic two‐sided measurement error problem where both production and inputs can be measured with error, and these errors can be correlated. We employ both self‐reported and objective measures of production and plot size to compute output elasticities under these alternative measurement scenarios. We find that using self‐reported production and plot size overestimates output elasticities and hence marginal returns to modern agricultural inputs (including chemical fertilizer and improved seed). These results are noteworthy in terms of informing conventional technology diffusion strategies as well as in view of revisiting existing presumptions about the profitability of modern agricultural inputs.

Public Infrastructure and Economic Takeoff

The purpose of this paper is to incorporate the role of public infrastructure investment on economic takeoff process in underdeveloped and emerging economies in a dynamic general equilibrium model. We use a two-period overlapping generations model, and consider two types of technologies (traditional and modern) that are used to produce the final output of firms. This paper confirms that economic takeoff is possible only when the capital per labor unit exceeds a certain threshold level. Thus, the takeoff process depends on the productivity race between traditional and modern technologies with increasing public infrastructure investment, while public infrastructures foster the productivity of both technologies. Similarly, an effective tax rate supports the takeoff process by stimulating the wage rate which in turn increases the capital per labor along with the saving rates. Hence, we clarify the conditions required for succeeding in the takeoff of an economy. In addition, we review some empirical evidence related to the output elasticity of public infrastructures.

Stochastic production function and costs-returns analyses of apiarists in Adamawa State, Nigeria

Abstract. This study assessed apiculture enterprise to determine the output elasticity of production, returns to scale, technical efficiency and profitability in Adamawa State, Nigeria. A total of four agricultural zones out of six, and 108 apiarists were selected through purposive and simple random methods, respectively. Descriptive statistics, stochastic frontier production function and budgetary technique were used in the analyses of data. Findings revealed that all (100%) the respondents were males within the age range of 21-30 years (44.44%). The majority of apiarists (87.0%) were married with household size of 1-10 persons (77.78%) and 50.0% of them had secondary school education. A larger proportion (37.0%) had between 6 and 10 years of beekeeping experience with 41.67% earning monthly income of N11000 (USD30.8) – N20000 (USD56.0) from other sources. Further, the findings revealed that labor and number of hives had reassuring influence on the industry, while age, education and experience could be used to reduce inefficiency in the industry to improve efficiency status. The apiarists also had mean technical efficiency of 89.9%, while the inefficiency estimate was only 10.1%. In terms of profitability, beekeeping in the study area was found to have had a high gross margin of N16800.00 (USD47.0) and net farm income of N15225.97 (USD42.6) for every beehive in a cropping season. The major constraints to beekeeping reported in the area included beehive crops theft, high propensity of bees’ stings, inadequacy of finance, rampant bush burning and deforestation, among others. It was concluded that beekeeping in the study area was found to be profitable and technically efficient. Improving beekeeping business in the area, among other things, would require its modernization and involvement of female participants, provision of soft credit facilities and enactment of stringent forestry laws to check unwholesome forestry practices.

DETECTION OF THE SPECIFICITY OF PUBLIC REPRODUCTION OF THE AMUR REGION WITH THE HELP OF THE COBB – DOUGLAS PRODUCTION FUNCTION

Construction of the Cobb – Douglas production function taking into account the factor “innovations and information” (on the example of the economy of the Amur region) has been considered. The adequacy of the obtained production function to the initial data has been checked using Fisher`s criterion. An analysis of the constructed production function using the indicators of average and marginal resource efficiency, elasticity of output, depending on resource consumption has been carried out. It has been revealed, that labor is the most stable factor during the study period. In the Amur Region in 2000-2017 labor-saving (intensive) gross regional product growth is observed. However, this indicator increased more slowly than factors, that is, the average costs calculated per 1 unit of output are growing and there is a diminishing effect on the scale of production.

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.

Persistent and temporary inefficiency in airport cost function: An application to Italy

Abstract We study an airport cost function with a four-random components stochastic frontier model that split the inefficiency in two parts: (1) persistent (long-run) and (2) temporary (short-run). We analyze as determinant of both inefficiency types several exogenous factors such as the airport ownership and LCCs share. We apply the model to the Italian airport system during the period 2010–15. We find that (1) average total cost inefficiency is 14%, and that a it is mainly due to temporary inefficiency, (2) that work load units have the largest cost–output elasticity (+0.31%), (3) that price of airport services has the largest cost-input elasticity (+0.50%) while labor has a +0.41% cost elasticity and capital only a +0.09% cost elasticity. There is also evidence of economies of scale. Moreover we find that LCCs reduce both types of inefficiency and that private airports are more cost efficient than public ones. These findings have interesting managerial (e.g., strictly monitoring service costs, expand LCCs flights) and policy (e.g., provide incentive to reduce temporary inefficiency, push airport privatization) implications.

The Role of Land in Temperate and Tropical Agriculture

We document differences in the elasticity of agricultural output with respect to land in temperate and tropical regions. We estimate this elasticity from the relationship of rural labour/land ratios and agroclimatic constraints using global district‐level data. We find that the elasticity in temperate areas (0.285) is higher than in the tropics (0.126), and that this is not an artefact of the level of development. The land elasticity influences the degree of decreasing returns to labour and capital in agriculture, and thus how sensitive living standards are to shocks in productivity and population. Evidence from the postwar mortality transition supports this prediction.

Synergetic conservation of water and energy in China's industrial sector: From the perspectives of output and substitution elasticities

China's rapid industrialization has induced water and energy shortage issue. Since water and energy resources are inextricably connected, the synergetic conservation of these two resources is conducive to China's sustainable development. In this paper, using a heterogeneous stochastic frontier model, we estimate the output and substitution elasticities of water and energy in China's industrial sector at the provincial level during the period of 2004–2014, in order to explore how to achieve synergetic conservation of water and energy resources by identifying the water-energy nexus. The results show that in China's industrial sector, the overall technical efficiency measured by the ratio of actual output to the ideal output in production frontier experienced a slight decline during the research period. The output elasticity (i.e., the changes in output caused by per unit change in a certain input) of water remains positive, while that of energy is negative in most years, indicating that water input increase contributes to industrial output growth, rather than energy input. Water and energy show a complementary relationship in most years, suggesting that a decrease in water input can reduce energy input. Therefore, to achieve the synergetic conservation of water and energy, the government should actively advance water-saving and energy-saving technologies by taking account of the differentiated production characteristics of different provincial-level industrial sector. In particular, when water and energy are complementary, the technological progress for saving either energy or water will be conducive to the synergetic conservation of these two resources.

Urban Bias and the Political Economy of Rural Land Policy in China

The property rights of rural land remain significantly restricted in China. Given its implications for broad swaths of the economy, rural land reform remains a central issue in the political economy of China. This paper presents a political economy model of rural land policy, taking some salient characteristics of China's context into account. We consider an urban-biased political regime that faces the conflicting motives of industrializing the economy and controlling rural-urban migration. The model shows that while a higher level of urbanization provides stronger incentives in favor of land reform, an increase in the productivity of the urban sector has a counteracting effect. These effects are mediated by the labor elasticity of urban output, the income share of labor in the rural sector and the political power of urban residents. The model sheds light on how the modernization of China's economy could affect the prospects for land reform.

The Macroeconomic Consequences of Infrastructure Investment

Can greater investment in infrastructure raise long-run output? Are infrastructure projects a good short-run stimulus to the economy? This paper uses insights from the macroeconomics literature to address these questions. I begin by analyzing the effects of government investment in both a stylized neoclassical model and a medium-scale New Keynesian model, highlighting the economic mechanisms that govern the strength of the short-run and long-run impacts. The analysis confirms earlier findings that the implementation delays inherent in infrastructure projects reduce short-run multipliers in most cases. In contrast, long-run multipliers can be sizable when government capital is productive. Moreover, these multipliers are greater if the economy starts from a point below the socially optimal amount of public capital. Turning to empirical estimation, I use the theoretical model to explain the econometric challenges to estimating the elasticity of output to public infrastructure. Using both artificial data generated by simulations of the model and extensions of existing empirical work, I demonstrate how both general equilibrium effects and optimal choice of public capital are likely to impart upward biases to output elasticity estimates. Finally, I review and extend some empirical estimates of the short-run effects, focusing on infrastructure spending in the ARRA.

The Impact of Renewable Energy on GDP

Besides traditional production factors, such as labor and capital, one of the inputs used in the production process is energy. Although the use of fossil fuels is more common in many production processes renewable energy sources are increasingly important in ensuring sustainable development. In many countries in the world, the share of renewable energy is the total energy consumption is very high, including in European Union (EU) countries. The purpose of this study is the investigate the output elasticity coefficients of capital and renewable energy in 12 EU countries by using the Cobb–Douglas production function approach. In this study, the Gross domestic Product these countries from 2000 to 2017, was examined using a generalized method of moments estimation, which used labor, capital, and renewable energy data. As a result of the study, the output elasticity coefficient in the Cobb–Douglas production function was found to be 1.147. This indicates that a 1% increase in labor, capital, and renewable energy increased GDP by 0.598%, 0.446%, and 0.093%, respectively. Among the findings, the relationship between GDP and explanatory variables is statistically significant and economically significant. It is understood that there is a positive relationship between the variables.

Collaborative innovation and policy support: the emergence of trilateral networks

ABSTRACT The present article models the critical factors for a successful and evolutionarily stable National System of Innovation. We simulate a model, against the background of increasingly complex technologies, in a national process of agents’ interactions with social-dilemma characteristics. In particular, the articleinvestigates the emergence of a trilateral collaborative innovation alliance among ‘enterprise’, ‘university’ and ‘government’. We apply a tripartite evolutionary game with a replication process and explore the role and options of the public policy agent to support collaboration on innovation. We find that some policy mix, in particular, a combination of (1) public rewards for cooperation, (2) public punishment for non-cooperation and (3) settings of public cost controls and tax income from innovation, can promote broad and sustainable innovation alliances. For instance, threats of strong punishment, even with low public rewards for cooperation, may promote the formation of a collaborative innovation alliance. We run some sensitivity analyses of the results through parametric variation of two critical factors of the model, knowledge spillover and output elasticity of knowledge input. We find some qualifications for the velocity of the process.