Decomposition Of Productivity Growth Research Articles

Comment on “Escaping the Middle‐Income Trap in Southeast Asia: Micro Evidence on Innovation, Productivity, and Globalization”

Lee and Narjoko (2015) provide a comprehensive literature survey of empirical studies that use manufacturing plant-level or firm-level data to investigate the relationship between innovation and globalization in Southeast Asian countries. Their survey covers studies for Indonesia, Malaysia, Philippines, Thailand, and Vietnam because the quality and availability of the microdata in these countries are better than that in the other countries of the Association of Southeast Asian Nations. Based on their literature survey, Lee and Narjoko conclude that globalization via trade and foreign direct investment plays an important role in the firm's innovative activities and productivity improvements in these countries, and recommend that innovation policies should be directed toward the enhancement of productivity, particularly in export-oriented sectors. One of my major concerns with Lee and Narjoko's paper is in the causal interpretation of the empirical results. As the authors mentioned, all the results surveyed in this paper have not examined the causal relationship running from firms' overseas activity to their innovation input (e.g. research and development activity) or productivity. Further considering the fact that only a few studies have examined the linkage among firm innovation, productivity, and overseas activity by firm size, I think that the statements such as “Innovation policy targeted at enhancing productivity, especially in export-oriented sectors” (p. 143) and “SMEs might warrant special attention given that the productivity constraint to exporting is likely to be larger for these firms” (p. 143) are not sufficiently supported by the concrete empirical evidence. Another concern I have relates to the heterogeneity of the countries covered in their survey studies. The economic structures and the degrees of participation in international trade are widely different across the countries in the Southeast Asian region. This implies the possibility that the environments surrounding small and medium enterprises (SMEs) and the levels of foreign firm participation in each country can be also quite different. Given such heterogeneity among the economic conditions in each country, it seems rather difficult to provide a common policy recommendation. It is important for Lee and Narjoko to take the differences such as heterogeneity among countries into account in their discussion, and hopefully propose policy recommendations according to the different stages of development in each country. Related to the second point, one way to explicitly study the heterogeneity of firms in each country is to examine the dynamics of firm-level productivity measured by, for example, total factor productivity (TFP). More precisely, it would be informative to examine the catch-up process of low productivity firms (usually SMEs) in the country toward the national productivity frontier firms or global frontier firms (e.g. high productivity firms in the USA as in the literature). As one example, Fukao et al. (2011) employ the empirical model in Bartelsman et al. (2008), and examine such a catch-up process using Japanese, Korean, Taiwanese, and Chinese manufacturing firm data. Another concern about Lee and Narjoko's paper is that it does not provide clear explanation of the relationship between firm network participation and its innovative activity. Furthermore, previous studies in the region do not explicitly examine the mechanisms of how the internal and external linkages are related to a firm's innovation performances. As a reference, Ma et al. (2014), for example, analyze the mechanism of a firm's export participation on its productivity development using Chinese manufacturing data, and find that “firms become less capital-intensive but more productive after exporting, compared to nonexporters that share similar ex ante characteristics” (abstract). It would be useful if Lee and Narjoko implemented a similar empirical analysis using microdata in Southeast Asian countries. As a final remark, given that the region is facing the slowdown in TFP growth and find it important to overcome the middle-income trap, Lee and Narjoko should conduct the productivity growth decomposition and discuss the sources of the productivity slowdown in these countries. Such an analysis might allow the authors to confirm that improving the resource allocation in a country through trade liberalization is a better policy recommendation than increasing TFP growth rather than promoting more firms to participate in the export market. As one extant study in this context, Hsieh and Klenow (2009) find that both China and India can increase their aggregate TFP by reducing resource misallocation in each country.

Efficiency and productivity analysis of Indian banking industry using Hicks-Moorsteen approach

Purpose – The purpose of this paper is to attempt to measure the performance of the Indian banking sector in terms of efficiency and productivity levels and their determinants during the post-reform period. Design/methodology/approach – The present study is a novel attempt as it has used pooled data for a duration of 15 years (i.e. 1997/1998-2010/2011) from 59 selected banks for estimating the Hicks-Moorsteen (HM) total factor productivity (TFP) index. Findings – Poor technical efficiency has experienced with scale efficiency change exerting dominant factors; whereas relatively better productivity growth has been experienced by the banks with major contributions from technical change components. The study found relatively underestimated efficiency and productivity levels by traditional data envelopment analysis-based Malmquist index. Additionally, the study brings into account the results for external and environmental determining factors contributing to the TFP growth. Originality/value – Using HMTFP indices has helped to eliminate certain drawbacks of data envelopment and provided the more elaborative decomposition of productivity growth along with their components so as to have lucid and multidimensional insights about the performance of the Indian banking industry after the initiation of financial reforms.

Decomposition of productivity growth in watersheds: A study in Bundelkhand region of Madhya Pradesh, India

Total change in production and productivity are the two important dimensions of benefits of watershed development programmes along with the conservation of land and water resources. To segregate out the impact of various watershed-based interventions on crop productivity, a study was carried out in Bundelkhand region of Madhya Pradesh state of India. Data were collected from 240 farmers’ selected from eight watersheds and eight control villages in the region using a multi-stage random sampling technique. Analysis of data indicated that implementation of watershed development programmes led to significant differences in productivity of major crops between watershed and non-watershed villages. Decomposition analysis of productivity difference between them indicated that the contribution of technological component was positive and higher than the contribution of input differentials. This calls for a wider coverage of watershed development programmes in order to bring all the areas under land treatment activities for improving the productivity level. Key words: Bundelkhand region, decomposition analysis, production function, watershed programmes.

Chilean Productivity Growth Decomposition by Demand Component Based on Input Output Tables 1996 and 2003

Using the Leontief inverse matrix derived from Chilean Central Bank input-output tables of the System of National Account we calculated the amount of labor directly and indirectly required to produce one physical unit of each commodity. If the share of various items in total consumption is used as the weight, the reciprocal of the weighted average of this amount of labour can be defined as the labour productivity of the consumption good and we can derive the labor productivity of the composition ratios of investment and export as well. As a result, the analysis leads us to conclude that the productivity growth of the Chilean economic structure during the transition period was led by export during the first part of the period until 1996 and it was an investment biased productivity growth in the second part of the period until 2003. However the demand growth was lead by export during the whole period.

Productivity growth decomposition with FE-IV approach: Rethinking Thai commercial banks after the financial crisis

To cope with the Asian Financial Crisis, Thai commercial banks have gone through a reconstructing period. This study aims to decompose the Total Factor Productivity growth (TFP) for Thai commercial banking industry with an output distance function. With an unbalanced panel dataset, we used the Fixed Effect (FE) model with Instrumental Variables (IV) to estimate the TFP growth empirically. We found the technical inefficiency change and scale effects were the two major contributors to the recent growth, while the input price effect of the premises and equipment was the major preventer of the growth. Moreover, the Thai commercial banking industry produced in decreasing return to scale, and the input–output allocation was not at the profit maximization optimum under the exogenous prices.

ENDOGENOUS SELECTION OF PRODUCERS, ASSET PRICES, AND PRODUCTIVITY SLOWDOWN*

This paper presents a simple heterogeneous agent model to show that shocks that reduce aggregate borrowing capacity of producers under borrowing constraints cause endogenous productivity slowdowns through declines in asset prices and biased selections of producers. These dynamics of the model replicate the qualitative features of the Japanese economy during the 1990s, including a decline in the within effect in total factor productivity growth decomposition as well as default on mortgage loans. Policy experiments demonstrate that foreclosure restrictions already in place mitigate an exogenous productivity slowdown, but that a tightening of foreclosure restrictions causes an endogenous productivity slowdown.

Accounting disclosure quality, capital market intensity and national productivity

This paper reports results through the use of Data Envelopment Analysis (DEA) to examine the effect of accounting disclosure quality on national productivity in two stages. In stage I, we adopt the framework of Kumar and Russell’s tripartite decomposition of productivity growth to estimate national productivity growth and its three underlying components, namely efficiency change, technical progress, and physical capital accumulation. In stage II, we regress national productivity growth and its three components against the interaction of accounting disclose quality and capital market intensity. In our empirical analysis we use data from 33 countries over the period 1985–2002. The results indicate that (1) the accumulation of physical capital is the primary driver of national productivity growth, and (2) the accounting disclosure quality affects national productivity through its effect on physical capital accumulation in countries with high capital market intensity. Overall, our results indicate that for those nations whose GDP relies heavily on capital markets, higher accounting disclosure quality stimulates higher level of physical capital, which, in turn, leads to higher national productivity.

European vs. U.S. airlines: Performance comparison in a dynamic market

This study measures and compares the efficiency and productivity of European and U.S. airlines, over the period from 2001 to 2008. We measure efficiency by estimating a Bayesian distance frontier model subject to regularity constraints. Productivity estimates are also derived parametrically, based on the estimates of the distance frontier model. We estimate both a constrained (i.e. subject to regularity conditions) and an unconstrained model and we show the importance of imposing the monotonicity and curvature conditions on the distance function. The efficiency and productivity results based on the constrained model indicate that European airlines have slightly higher efficiency and productivity growth than U.S. airlines. A comparison based on the type of airlines indicates that low-cost airlines are on average more productive and efficient than full-service airlines. The decomposition of productivity growth and related market discussions are also provided.

Economic and productivity growth decomposition: An application to post-reform China

This paper examines and applies the theoretical foundation of the decomposition of economic and productivity growth to the thirty provinces in China's post-reform economy. The four attributes of economic growth are input growth, adjusted scale effect, technical progress, and efficiency growth. A stochastic frontier model with a translog production and incorporated with human capital is used to estimate the growth attributes in China. The empirical results show that input growth is the major contributor to economic growth and human capital is inadequate even though it has a positive and significant effect on growth. Technical progress is the main contributor to productivity growth and the scale effect has become important in recent years. The impact of technical inefficiency is statistical insignificant in the sample period. The relevant policy implication for a sustainable post-reform China economy is the need to promote human capital accumulation and improvement in technical efficiency.

IT Capital Accumulation and Productivity Growth in Public Accounting Firms

<para xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink"> In this study, we apply the tripartite decomposition of productivity growth proposed by Kumar and Russell (<emphasis emphasistype="italic">Amer. Econ. Rev.</emphasis>, vol. 92, pp. 527–548, 2002) to estimate and evaluate the contribution of firms’ IT capital accumulation to their productivity growth. Analyzing a panel data on 52 public accounting firms in Taiwan for ten years from 1993 to 2002, our results indicate that the productivity growth of these accounting firms was primarily due to their accumulation of IT capital. In addition, our results indicate that services diversification towards nonaudit services and workforce quality contributed to accounting firms’ IT capital accumulation, which, in turn, led to their productivity growth. </para>

Debreu’s coefficient of resource utilization, the Solow residual, and TFP: the connection by Leontief preferences

Debreu’s coefficient of resource utilization is freed from individual data requirements. The procedure is shown to be equivalent to the imposition of Leontief preferences. The rate of growth of the modified Debreu coefficient and the Solow residual are shown to add up to TFP growth. This decomposition is the neoclassical counterpart to the frontier analytic decomposition of productivity growth into technical change and efficiency change. The terms can now be broken down by sector as well as by factor input.

Service Sector Growth in China and India: A Comparison

China: An International JournalVol. 05, No. 01, pp. 137-154 (2007) Comments and NotesNo AccessService Sector Growth in China and India: A ComparisonYanrui WUYanrui WUThe author is Associate Professor in the School of Economics and Commerce at the University of Western Australia. He earned his PhD in economics from the University of Adelaide. His main research interests are economic development, Asian economies and productivity analysis.https://doi.org/10.1142/S021974720700009XCited by:10 PreviousNext AboutSectionsPDF/EPUB ToolsAdd to favoritesDownload CitationsTrack CitationsRecommend to Library ShareShare onFacebookTwitterLinked InRedditEmail FiguresReferencesRelatedDetailsCited By 10The Decomposition of Productivity Growth for India: Before and After 1991Kausik Gangopadhyay, Debasis Mondal and Thasni T1 March 2023 | IIM Kozhikode Society & Management Review, Vol. 35Does FDI Generate Employment? An Empirical Study of Indian Service SectorMohammad Aarif and Md. Tarique20 March 2022 | SDMIMD Journal of Management, Vol. 13Malicious Spam Distribution: A Routine Activities ApproachRobert C. Perkins, C. Jordan Howell, Cassandra E. Dodge, George W. Burruss and David Maimon18 July 2020 | Deviant Behavior, Vol. 43, No. 2Wind Energy and Solar PV Developments in ChinaTariq Muneer, Eulalia Jadraque Gago and Saioa Etxebarria Berrizbeitia1 January 2022Competitiveness and Enterprise Development for Innovation-Led Growth Government of Rwanda2 July 2020Dynamics of Employment and Economic Growth: A Comparative Study of China and IndiaManjit Sharma and Pushpak Sharma4 December 2019 | Millennial Asia, Vol. 10, No. 3What drives cross-border mergers and acquisitions?Professor Sanjoy Sircar, Dr Rajat Agrawal, Dr, Vanita Tripathi and Ashu Lamba16 Nov 2015 | Journal of Strategy and Management, Vol. 8, No. 4China’s services sector: the new engine of economic growthYanrui Wu29 February 2016 | Eurasian Geography and Economics, Vol. 56, No. 6Sectoral Productivity and Regional Disparities in China, 1978–2006Kiril Tochkov and Wenting Yu27 June 2013 | Comparative Economic Studies, Vol. 55, No. 4Bibliography26 February 2010 Recommended Vol. 05, No. 01 Metrics History PDF download

Decomposing productivity growth and divergence: an index number approach

We propose a cross-country productivity growth decomposition that allows us to quantify the industry-level contributors to an aggregate productivity growth differential. We deploy this cross-country decomposition to quantify—for the first time—the disaggregate contributors to the divergence in market sector productivity growth between Australia and New Zealand. The results suggest that large contributions to the divergence arise from differences in labour growth across the two countries and that cross-country structural differences are large, and generally act to reduce the divergence. Most of the industries are found to add to the divergence, with particularly large contributions coming from differences across the mining and wholesale trade industries.

Externalities, efficiency, regulation, and productivity growth in the U.S. electric utility industry

This paper examines the decomposition of total factor productivity growth for firms subject to regulation, given the production of a bad output. The production of good and bad outputs provides benefits and costs to society. Corporate socially responsible firms recognize the cost to society of producing the bad output. The paper separates the production technology and regulation effects from both the scale and technical change components. The paper also examines the measurement and decomposition of productivity growth when not accounting for production of the bad output. Using a 1992–2000 panel of 34 U.S. investor-owned electric utilities, results indicate that improvements in the scale, efficiency change, and technical change components contributed to positive growth. Not accounting for production of the bad output led to, on average, an overestimation of both the rate of productivity growth, and the contributions of scale economies and technical change to changes in productivity growth.

A more flexible decomposition of productivity growth

Conventional productivity growth decompositions, such as those of Baily, Bartelsman and Haltiwanger (2001) and Grilliches and Regev (1995), first aggregate each firm's productivity level into an aggregate productivity index, and then allocate aggregate growth back to the firms forming the aggregate. It is shown that this can produce misleading results, and two more flexible decompositions are proposed that are consistent with the superlative Törnqvist productivity growth index.

The Dynamics of Productivity: A Decompostion Approach Using Distribution Functions

In this paper we use a micro panel data set of Spanish manufacturing firms to measure the contributions of continuing firms and turnover to total factor productivity growth over the period 1990–1997. The paper proposes an approach to the decomposition of productivity growth that is based on the estimation of productivity distributions. We characterize the dynamics of productivity distributions defining counterfactual distributions and using non-parametric methods. The results we obtain indicate that incumbent firms are the main factor contributing to the change in the productivity distribution. Net entry contributes positively to TFP growth. Finally, changes in the relative weights of incumbent, entering and exiting firms produce a counter-cyclical movement of productivity.

Public infrastructure and productivity growth in Greek agriculture

AbstractRecent research has focused on the effect of public infrastructure on economic performance. In this paper, a model of Greek agriculture's technology and behaviour is constructed based on the dual cost function framework. The model provides a decomposition of productivity growth into the components technical change, returns to scale, and public infrastructure. The empirical estimates indicate that public infrastructure investment provides a significant return to agriculture and augments productivity growth. Over the period 1960–1995, the impact of public infrastructure on productivity growth in livestock and crop production is found to be positive, although it has been declining since the late 1970s. These results strongly suggest that a decline in public infrastructure investment can partly explain the observed decline in the productivity growth of Greek agriculture in the 1980s.

Public infrastructure and productivity growth in Greek agriculture

Recent research has focused on the effect of public infrastructure on economic performance. In this paper, a model of Greek agriculture’s technology and behaviour is constructed based on the dual cost function framework. The model provides a decomposition of productivity growth into the components technical change, returns to scale, and public infrastructure. The empirical estimates indicate that public infrastructure investment provides a significant return to agriculture and augments productivity growth. Over the period 1960–1995, the impact of public infrastructure on productivity growth in livestock and crop production is found to be positive, although it has been declining since the late 1970s. These results strongly suggest that a decline in public infrastructure investment can partly explain the observed decline in the productivity growth of Greek agriculture in the 1980s.

Debreu's Coefficient of Resource Utilization, the Solow Residual, and TFP: The Connection by Leontief Preferences

Debreu's coefficient of resource utilization is freed from individual data requirements. The procedure is shown to be equivalent to the imposition of Leontief preferences. The rate of growth of the modified Debreu coefficient and the Solow residual are shown to add up to TFP growth. This decomposition is the neoclassical counterpart to the frontier analytic decomposition of productivity growth into technical change and efficiency change. The terms can now be broken down by sector, as well as by factor input.

Decomposition of Productivity Growth Using Distance Functions: The Case of Dairy Farms in Three European Countries

AbstractWithin an output distance function framework, the Total Factor Productivity growth index is decomposed into four components (technical change, technical and allocative efficiency, and scale component). We estimate stochastic translog output distance functions using panel data from dairy farms over the period 1991–94 for three European countries (Germany, the Netherlands, and Poland). Results indicate that the change in the productivity growth index in Germany (+6%) and Poland (−5%) are mainly dictated by the technical change component. In contrast, the productivity growth index in the Netherlands (+3%) is influenced by allocative efficiency components.