Production Function Approach Research Articles

Quantification of the Indirect Use Value of Functional Group Diversity Based on the Ecological Role of Species in the Ecosystem

An important issue in biodiversity valuation is gaining a better understanding of how biodiversity conservation affects economic activities and human welfare. Quantifying the economic benefits of biodiversity for human well-being is not straightforward. Here, we expand the ecosystem service cascade by (i) attributing a methodology to the different steps of the cascade to assess the effects of changes in functional group diversity on economic activities; (ii) including multiple attributes for defining functional diversity and (iii) integrating a dynamic ecological model simulating complex interactions and feedbacks between species with an economic model assessing the effects of changes in functional group diversity for gross revenues. The stepwise methodological framework integrates a production function approach with a market price-based approach in order to investigate the indirect use value of functional group diversity based on the ecological role of species in the ecosystem. The methodology is applied to estimate the relationship between the gross economic value of Chinook salmon (Pacific Northwest, United States) and the diversity of freshwater macroinvertebrates. The results of our analysis emphasize the importance of biological diversity for sustaining ecosystem goods and services. The analysis provides a tractable framework for quantitatively exploring the economic consequences of changes in functional group diversity.

Impact of remittance on domestic labour productivity in Bangladesh

The inflow of remittances is the largest source of foreign capital to the economy of Bangladesh, which has an important contribution to Gross Domestic Product (GDP) with broader socio-economic impact. It is important to investigate the labour productivity (LP) effects of international migration and subsequent remittances inflow because, economic growth in the long run is better reflected through LP growth. Remittances can have counteractive effects on LP of the receiving countries through its interaction with labour supply and capital accumulation. We investigated the relationship between remittances and domestic LP to ascertain long run growth impact of remittances under Solow-Swan growth model using production function approach. We performed Johansen co-integration tests using data over the 1976-2014 periods. The co-integrating equation estimates suggested a positive linear relationship between remittance and LP. The findings pointed out the direct effects of remittances on LP through physical capital accumulation. The findings of the study are a vital contribution to the empirical literatures of remittances and economic growth, which is important for policy options.Progressive Agriculture 29 (1): 33-44, 2018

Assessing solution quality and computational performance in the long-term generation scheduling problem considering different hydro production function approaches

Abstract The long-term generation scheduling (LTGS) problem aims at finding a generation policy that minimizes an objective function over a multi-year planning horizon. A crucial aspect of this problem is the Hydropower Production Function (HPF), which relates power with head, turbined outflow, and efficiency of the generating units. Given that the LTGS is a large-scale stochastic optimization problem, the HPF is modeled in a simplified manner. However, considering the high-performance computers currently available and the recent advances in stochastic optimization algorithms, it is possible to enhance the HPF modeling to use the energy resources more efficiently. This paper proposes a piecewise linear model of HPF that considers the plant generation as a function of the volume and the total outflow. Unlike previous works, the HPF also considers the (nonlinear) efficiency function of each generating unit. The paper also presents a comparison between the proposed HPF and a one-dimensional HPF known as constant productivity. The generation policy and the computational burden are analyzed using an optimization-simulation process based on Stochastic Dual Dynamic Programming algorithm. The computational tests use data of a large-scale electrical power system, which corresponds to about 90% of the Brazilian system.

On the productive efficiency of Australian businesses: firm size and age class effects

After 26 years of growth, the Australian economy is beginning to show signs of stress and declining productivity. In this paper, we consider aspects of productive efficiency using an Australian business population data set. Using a production function approach, several key findings are uncovered. Firstly, decreasing returns to scale are identified as a significant feature of the Australian business sector. This implies that not all firm growth will lead to productivity gains. Secondly, there are significant differences in the way value added is created between small and large firms. In the largest 25% of firms, the capital contribution to value added is four times that of the smallest 25% of firms. Thirdly, efficiency follows an inverted ‘U’ shaped in firm age with the youngest (0–2 years) and oldest (> 9 years) firms being less productive than the middle 50% of firms. Fourthly, there are also huge industry sector variations in productivity. In particular, financial services appears to be the most productively efficient sector in the Australian economy and mining the least efficient.

ICT stochastic externalities, technology innovation and business services: is there an evidence of missed opportunity growth?

ABSTRACTIn this paper, we present an analysis of the production process for some OECD countries and consider the new technology of the ICT capital as driver of growth. In doing so, the production function approach adopted allows to disentangle the externalities not exploited. In line with the general-purpose technology theory, we attribute such externalities to the new technology ICT capital. Business services are a relevant vehicle to use better the innovative capital embedded in the production process. We develop and implement a methodology for the evaluation of the effect on growth related to the interaction between innovative capital and business services. The main conclusion of the paper is that the potentials of new technologies in use are almost completely exploited during the productive process. Then, even if a competitive solution is viable, there are small, though possible, margins to improve a sustainable European growth in the long run linked to externalities. We also point out some conclusions on the capital and labor shares showing that the latter is ‘too small’ both in the long and short run.

Parenting style as an investment in human development

We propose a household production function approach to human development that explicitly considers the role of parenting style in child rearing. Specifically, parenting style is modeled as an investment that depends not only on inputs of time and market goods, but also on attention. Our model relates socioeconomic disadvantage to parenting style and human development through the constraints that disadvantage places on cognitive capacity. We find empirical support for key features of our model. Parenting style is a construct that is distinctive to standard parental investments and is important for young-adult outcomes. Effective parenting styles are negatively correlated with disadvantage.

Does R&D spur productivity growth in Australia’s broadacre agriculture? A semi-parametric smooth coefficient approach

ABSTRACTThis article analyses the role of research and development (R&D) in Australia’s broadacre farming by using the semi-parametric smooth coefficient model. While the conventional production function approach only captures the direct effects of R&D, this methodology captures both the direct impact of a change in R&D on output and the indirect impact through changes in efficiency of use of factor inputs in the production process. Moreover, technical inefficiency is introduced in the model allowing it as a function of R&D. Using a unique state-level dataset covering the period 1995–2007, this empirical study finds that once both the direct and indirect effects are taken into consideration, R&D investments significantly increase outputs. The results also show that there are substantial variations in the effects of R&D on output across the state-level average farm through technology parameters as well as through technical inefficiency. Such variations need to be taken into account when designing policies for investing public R&D in agriculture.

THE INFLUENCE OF THE MANAGER ON FIRM INNOVATION IN EMERGING ECONOMIES

The focus of this paper is on the relatively under-researched area of the influence of management on innovation activities for firms in emerging economies. Many emerging economies adopt a strategy of outward-oriented development with the aim to enhance innovation performance through Foreign Direct Investment (FDI) and international trade. However, attention should be paid to firm mechanisms, including intangibles, that may enable a firm to benefit from the more tangible performance-enhancing effects. It is through such a lens that we examine firm innovation in emerging economies, focusing on how variations in management experience, management practices and management incentives impact innovation performance. We employ a production function approach to identify the effect of the management environment on innovation diversity for firms in emerging economies. Our diversity of innovation measure takes account of five types of innovation activity, and is indicative of the degree of ‘innovativeness’ that the firm possesses. A Tobit estimation technique is employed. Innovation decisions typically involve managers as filtering mechanisms to consider a range of external and internal factors that enhance the likelihood of innovation outcomes. Our results indicate that management experience, management practices and management incentives are all important in determining innovation activities in firms from emerging economies. Our analysis reveals the importance of the management environment in explaining innovation differences at the level of the firm in emerging economies. Therefore, strategies to empower and support managers in emerging economies should be considered alongside outward-orientated development strategies.

Capital-labour-energy substitution in a nested CES framework: A replication and update of Kemfert (1998)

The ease with which firms can substitute away from energy to other inputs is an important determining factor in the costs of climate change mitigation policies. Climate policy simulation models usually represent this substitutability by using the Constant Elasticity of Substitution (CES) function with parameter values often taken from econometric studies. Hence, the accuracy of the estimated substitution parameters has a strong influence on the validity of the climate policy simulation. In this article, we attempt to replicate the results presented in a widely cited article in this field: Kemfert (1998) (‘Estimated substitution elasticities of a nested CES production function approach for Germany’, Energy Economics, 20, 249–264). We first use the data and software reported in that article and compare our results with those reported in the original study. We then test the same data and a new, more recent, data set on German industrial data with an improved econometric approach. Despite applying various approaches and modifications, we are not able to replicate the results in Kemfert (1998). We furthermore conclude that the data sets that are typically used to estimate nested CES functions often have too few observations and too little independent variation of the explanatory variables to obtain reliable estimates when using a direct non-linear approach.

Cereal crops choices and economic resilience face to climate variability in southern Mali

Cereal crops choices and economic resilience face to climate variability in southern Mali Keba SISSOKO, Kimseyinga SAVADOGO, Michel VAKSMANN, Abel TIEMTORE Abstract This study uses the production function approach to assess and compare resistance of millet, Sorghum and Maize facing climate variability in Sikasso and Ségou regions. A robust estimation of the multiple regression models with Ordinary Least Squares (OLS) method was used. Overall, the results show that: one of the major causes of the fluctuations of the chosen cereals’ production is climate variability; cereals have different resistance level facing climate variability across regions; finally cereals are more related to climate in Sikasso region than Ségou region. At the sight of these results, setting up following policies was recommended: promotion of production system based on new agricultural practices to increase productivities in different areas and policies which promote ideal cultures for each region’s agricultural development (regional specialization). Full Text: PDF DOI: 10.15640/jaes.v7n1a12

Optimal Commodity Advertising in Bilateral Oligopoly

This study derives an optimal commodity advertising intensity rule for a vertically related market under bilateral oligopoly. The new optimality condition derived in this study extends the seminal Dorfman-Steiner Theorem [1] and recently published optimal advertising conditions by two major aspects. First, we strengthen the previous work by considering potential market power exertion in all buying (input) and selling (output) markets, i.e., all four adjacent upstream and downstream markets of processors and retailers. Second, we use a primal production function approach to avoid the symmetry assumption that many earlier studies imposed on conjectural elasticities of input and/or output markets. Our new condition suggests that, without considering the potential market power exertions, the optimal advertising intensity and expenditures are overestimated. Our derivation also indicates that previous optimal advertising conditions derived under the assumption of fixed proportion technology could underestimate the optimal intensity and expenditures, particularly when advertising elasticity is elastic.

Assessing the Impact of Structural Reforms Through a Supply-Side Framework: The Case of Argentina

The paper uses a supply-side framework based on a production function approach to assess the role of structural reforms in boosting long-term GDP growth in Argentina. The impact of product, labor, trade, and tax reforms on each supply-side channel—capital accumulation, labor utilization, and total factor productivity, proxied with an efficiency estimate—is assessed separately and then combined to derive the total impact on growth. The largest effect of structural reforms, involving regulatory changes that promote competition and facilitate flexible forms of employment, comes through the productivity/efficiency channel. Pro-competition regulation also improves labor utilization, while lower entry barriers and trade tariffs are important for capital accumulation. Structural reforms could have substantial effects on Argentina’s long-term GDP growth; for example, an ambitious reform effort to improve business regulatory environment would add 1–1½ percent to average annual growth of GDP.

Assessing the Impact of Structural Reforms Through a Supply-side Framework: The Case of Argentina

The paper uses a supply-side framework based on a production function approach to assess the role of structural reforms in boosting long-term GDP growth in Argentina. The impact of product, labor, trade, and tax reforms on each supply-side channel—capital accumulation, labor utilization, and total factor productivity, proxied with an efficiency estimate—is assessed separately and then combined to derive the total impact on growth. The largest effect of structural reforms, involving regulatory changes that promote competition and facilitate flexible forms of employment, comes through the productivity/efficiency channel. Pro-competition regulation also improves labor utilization, while lower entry barriers and trade tariffs are important for capital accumulation. Structural reforms could have substantial effects on Argentina’s long-term GDP growth; for example, an ambitious reform effort to improve business regulatory environment would add 1–1½ percent to average annual growth of GDP.

Early Life Determinants of Cognitive Ability: A Comparative Study on Madagascar and Senegal

We study the determinants of educational and cognitive outcomes of young adults in Madagascar and Senegal employing a production function approach. Using unique and comparable long-term panel data sets from both countries, we find that cognitive skills measured using test scores in second grade are strong predictors of school attainment and cognitive skills of a cohort of individuals surveyed in their early twenties. The inclusion of early life household wealth, parental education and other household characteristics in the model does not diminish the impact of early cognitive ability on educational and cognitive outcomes in young adult life. Additionally, we find that both early life cognitive ability and health seem to have independent effects on educational attainment and adult cognition. In Senegal, both math and French scores are strong predictors of adult cognitive skills, whereas in Madagascar math plays a relatively stronger role. We find suggestive evidence that the association between early life cognitive ability and later life outcomes is stronger among girls as compared to boys. We also show significant differences in the relationship between early ability and later life test scores for those cohort members according to their height, which we consider a proxy for health status – shorter individuals show a stronger relationship between second grade performance and later life outcomes. These findings highlight the importance of how falling behind in early life may be critical in determining longterm outcomes, particularly for vulnerable groups, that is girls and shorter individuals.

Credit Availability and Technical Efficiency of Boro Rice in Pabna District, Bangladesh: A Stochastic Frontier Analysis

The goal of this study is to analyze the technical efficiency and its determinants of rice production in Bangladesh using data from Boro rice farmers of Pabna district. Required data are collected from 100 Boro rice producing farmers of Pabna district selected using multistage random sampling procedure. In scrutinizing the data, farm specific technical efficiency scores are estimated using the Cobb-Douglas Stochastic Frontier Production function approach. The study found that technical efficiency of Boro rice farms in Pabna district are 92.3% which indicate that Boro rice farms have been operating below the maximum level of production frontier. It is also found that 'ploughing cost' 'pesticide cost', 'labor cost', and 'irrigation' are the significant elements that affect the level of technical efficiency while ''fertilizer cost' and 'seed' are found insignificant in moving technical efficiency of Boro rice production in the study area. Farmers can increase their production of Boro rice by 7.7% given the available technology through increasing the use of labor, seed also irrigation inputs and also by using proper amounts of fertilizer and pesticide inputs. The outcomes from the assessed inefficiency effect model make known that farm size, age, education, training and credit facility are the significant influences which are negatively related to technical inefficiency of Boro rice production. This study provides that steps to raise education, training as well as credit facilities are influential to reduce technical inefficiency of rice production in the study area. Intuitively, in this connection as a long run approach, the investment on research connected activities should be increased to change the production technology.

노후산업단지 재생사업의 경제적 편익 추정: 생산함수 접근법

노후산업단지 재생사업의 경제적 편익 추정: 생산함수 접근법

The Sectoral and Regional Economic Consequences of Climate Change to 2060

This paper presents a new detailed global quantitative assessment of the economic consequences of climate change (i.e. climate damages) to 2060. The analysis is based on an assessment of a wide range of impacts: changes in crop yields, loss of land and capital due to sea level rise, changes in fisheries catches, capital damages from hurricanes, labour productivity changes and changes in health care expenditures from diseases and heat stress, changes in tourism flows, and changes in energy demand for cooling and heating. A multi-region, multi-sector dynamic computable general equilibrium model is used to link different impacts until 2060 directly to specific drivers of economic growth, including labour productivity, capital stocks and land supply, as well as assess the indirect effects these impacts have on the rest of the economy, and on the economies of other countries. It uses a novel production function approach to identify which aspects of economic activity are directly affected by climate change. The model results show that damages are projected to rise twice as fast as global economic activity; global annual Gross Domestic Product losses are projected to be 1.0–3.3% by 2060. Of the impacts that are modelled, impacts on labour productivity and agriculture are projected to have the largest negative economic consequences. Damages from sea level rise grow most rapidly after the middle of the century. Damages to energy and tourism are very small from a global perspective, as benefits in some regions balance damages in others. Climate-induced damages from hurricanes may have significant effects on local communities, but the macroeconomic consequences are projected to be very small. Net economic consequences are projected to be especially large in Africa and Asia, where the regional economies are vulnerable to a range of different climate impacts. For some countries in higher latitudes, economic benefits can arise from gains in tourism, energy and health. The global assessment also shows that countries that are relatively less affected by climate change may reap trade gains.

Natural Gas Consumption and Economic Growth in Pakistan: Production Function Approach

This study investigates the relationship between energy consumption and economic growth in case of Pakistan using annual data from 1977 to 2013. Using Johansen maximum likelihood approach to estimate the long-run relationship and Granger causality to check the direction of causality, the study finds that the long-run relationship between natural gas consumption and economic growth is positive and statistically significant. Furthermore, the Granger causality shows that there exists energy-led growth hypothesis in Pakistan as Granger causality runs from energy to economic growth. The policy implication is that uninterrupted availability of energy is essential and conservation strategies could be harmful for the economic growth.

Urban adaptation to climate sensitive health effect: Evaluation of coping strategies for dengue in Delhi, India

In absence of adaptation initiative, residents resort to coping strategies to manage climate-related health risks. Delhi, the capital city of India, is highly endemic to the climate sensitive vector-borne disease of dengue. The weeks of a year with risk of dengue occurrence due to weather patterns are identified by using Poisson regression which uses data for climate variables and reported dengue cases. The coping strategies adopted by household are then evaluated using survey data of 559 households. An economic evaluation of coping strategies to serve as an important decision tool in developing adaptive capacity was carried out using household health production function approach. The econometric tools of Negative Binomial Regression and probit regression have been used for evaluation. The methodological framework provides a novel approach by linking climatic variability, health impact and economic evaluation of adaptation strategies. The results reveal that the dengue risk is mainly addressed by coping strategies at the household level and intervention measures are ineffective due to inappropriate timing and selective approach. The annual economic benefit of adopting coping strategies is estimated as US$ 65 per household. The benefits of coping strategies in reducing dengue risk contribute to the planning of adaptation strategies at city level.

Contributions of Public Investment to Economic Growth and Productivity

Whereas a large variety of previous studies show mixed results regarding the relationship between public investment and economic outcome, several studies have been conducted on related issues in Korea. The present study deals with the effect of public investment in Korea on economic growth and productivity. Using administrative data, it exploits three different methodologies: the total factor productivity approach, production function approach, and stochastic frontier production function approach. The results of this study show that public investment has a statistically significant effect on economic growth. However, it contributes little to enhance productivity. It is explained that there exists inefficiency of production in the Korean economy. These findings indicate that public investment has played a central role in the direct input factor and not in indirect role in Korea. Thus, it is necessary for public investment policies to concentrate on enhancing the efficiency of the Korean economy.