Terms Of Total Factor Productivity Research Articles

Gender, firm performance, and FDI supply–purchase spillovers in emerging markets

The paper measures the gender premium (or penalty) in productivity and innovation of firms in 32 emerging economies. We estimate whether the gender status of firms’ ownership in FDI recipient countries matters for the size of knowledge spillovers from linkages between local firms and Multinational Enterprises (MNEs). Furthermore, we explore whether the gender ownership structure of Multinational Enterprises (MNEs) is also vital for spillovers between MNEs and local firms. Our results show that female-owned firms (both local and MNEs) are on average less productive and innovative. Although domestic firms benefit from supplying inputs to MNEs in terms of Total Factor Productivity (TFP) and innovation, a gender handicap cancels out these gains potentially. Female gendered MNEs also impose a similar penalty on knowledge spillovers. As a policy implication, the paper highlights the importance of mitigating gender discrimination for improving productivity and absorptive capacity of local firms in the emerging world.

Measuring the efficiency and productivity of U.K. insurance market

AbstractThe U.K. insurance industry has a dominant international presence, suggesting strong competitiveness and performance. Yet, its efficiency and productivity has rarely being investigated. The purpose of this paper is to provide an overview of insurers' performance in the U.K. insurance market from 1996 to 2017, using stochastic frontier analysis to measure efficiency scores and productivity at the firm level. Results show the U.K. insurance industry could improve by about 40% in terms of cost efficiency and by 70% in terms of profit efficiency. In addition, our model reveals a higher cost efficiency score compared to profit efficiency, implying that there are higher inefficiencies on the income side of the insurance industry as measured by our profit function. In terms of total factor productivity (TFP) growth, we report a steady decline over time while on average is negative. By decomposing TFP growth into its underlying components, we reveal that the reported negative trend in TFP growth over time has mainly been driven by the enhanced competition that resulted in a drop in markup, while the scale and cost efficiency has also driven TFP growth down. However, from a positive point of view, we report evidence of both β‐convergence and σ‐convergence in cost and profit efficiency.

Are the Agricultural Subsidies Based on the Farm Size Justified? Empirical Evidence from the Czech Republic

The paper aims to explore the relationship between size, production orientation, and performance in the Czech agriculture and to answer the research question as to what extent a farm size and a product orientation of farm do matter in relation to its productivity and profitability. We use data from FADN CZ database (Farm Accountancy Data Network—Czech Republic) of conventional farms oriented on fieldcrops production, milk production, other grazing livestock and mixed production, and we cover the period from 2015–2020. Pursuing an econometric approach (ANOVA and multivariate regression analysis), we test productivity and profitability differentiation among the different-sized and different production orientation companies. Finally, subsidies and their effects on different groups of companies are assessed. The findings from testing our empirical model indicate that very large farms have statistically significantly higher total factor productivity than large farms, which perform better than medium and small farms. Average productivity of large-size farms compared to small and medium farms is 1.4 times higher in terms of total factor productivity, more than two times higher in terms of agricultural land productivity, and 3.2 times higher in terms of labour productivity. The findings show that farms with field production statistically significantly outperform farms with orientation on other grazing livestock and mixed production. Different levels of productivity are translated into differentiation in the profitability. The highest profitability ratios are achieved by large farms followed by very large, medium, and small ones. The assessment of ratio of subsidies to agricultural production shows that small farms received 2.3 times higher agricultural subsidies per unit of agricultural production compared to very large farms.

Dinámica de la productividad manufacturera en la frontera norte mexicana, regional y por estados: 1993-2018

The objective of this article is to describe the performance of the total productivity of the manufacturing factors in the Northern border region of Mexico during the period 1993-2018. The methodological approach is focused on Solow´s Residual and Harberger’s Sunrise/Sunset diagrams to identify the contributions of each of the states. The main findings of the research indicate significant increases in the sources of growth for the region. In addition, the region’s progress is diversified among the entities, with Nuevo León being the most prominent. It is concluded that the northern border region has become the largest pole of job creation in the country’s manufacturing sector, although it has been limited in terms of total factor productivity. This makes it necessary to develop intraregional policies with specific measures that improve aggregate productivity in each state.

Firm-Level Total Factor Productivity Convergence in German Electricity and Gas Industry

This paper investigates the degree of total factor productivity convergence for the German electricity and gas firms. We use different approaches to compute the productivity level and several old and new panel unit root tests from the second generation to check the existence of a convergence process. For robustness purpose we compare the convergence between small and medium-sized enterprises and large companies. Our findings show the existence of the convergence process in terms of total factor productivity, result confirmed by all categories of tests we use. Therefore, an innovation transfer is recorded between German electricity and gas firms, transfer that is slightly higher for small and medium-sized enterprises.

The impact of research and development activity on the TFP level in manufacturing in Poland

Research background: The paper presents the issue of total factor productivity in the manufacturing industry in Poland. It has been assumed that total factor productivity (TFP) is a synthetic measure of efficiency of the production process and a measure of the impact of technical progress on the rate of economic growth.
 Purpose of the article: The main aim of the paper is to assess the differentiation in the level of total factor productivity (TFP) occurring among the Section C manufacturing divisions in Poland. In particular, the paper raises the issue of measuring and analysing the relationship between expenditure on research and development and the level of TFP in manufacturing divisions in Poland.
 Methods: In the presented research, the TFP level was determined by using the two-factor Cobb-Douglas production function, while econometric panel models were used to assess the studied relationship.
 Findings & Value added: The presented considerations show that manufacturing divisions in Poland are diversified in terms of total factor productivity. Generally, manufacturing divisions with high R&D intensity, i.e. divisions classified as so-called high-tech ones, are characterised by a high TFP level. The econometric analysis carried out allows us to conclude that expenditure on R&D incurred in manufacturing enterprises significantly affects the level of TFP.

Trading activities, productivity and markups: Evidence for Spanish manufacturing

AbstractThis work analyses the firms' internationalisation strategies of importing intermediates and exporting output, and the potential rewards of these activities in terms of total factor productivity (TFP), as a proxy for marginal costs, and markups. It further deepens into the study of the relationship between internationalisation strategies and markups by disentangling whether it operates through affecting firms' marginal costs and/or firms' prices. The panel database employed in this paper is the Spanish Survey on Business Strategies (ESEE) for the period 2006–14. Results in the paper distinguish between SMEs and large firms and indicate that there is high persistence in the performance of these activities and in firms' TFP and markups. For SMEs, we obtain rewards from importing inputs as well as exporting output in terms of TFP and markups. For large firms, we obtain rewards in TFP from the importing activity and rewards in markups from the exporting activity. Finally, we find evidence that the effects of internationalisation strategies on markups are due to both a price channel and a marginal cost channel.

Productivity of the Indian non-life insurance sector

PurposeThe purpose of this paper is to analyse the performance of the Indian non-life (general) insurance sector in terms of total factor productivity (TFP) over the period 2005–2016.Design/methodology/approachThis study utilises Färe‒Primont index (FPI) to access the change in TFP and its components: technical change, technical efficiency and mix and scale efficiency over the observation period. Moreover, it employs the Mann–Whitney U-test to scrutinise the difference between the public and the private insurers in terms of growth in productivity.FindingsThe results reveal that the insurance sector possesses a very low level of TFP. Also, the results divulge an improvement of 11.98 per cent in TFP of the insurance sector at an annual average rate of 12.41 per cent over the observation period. The growth in productivity is mainly attributable to the improvement of 10.81 per cent in the scale‒mix efficiency. The progress in scale‒mix efficiency is mainly the result of improvements in residual scale and residual mix efficiency. The results also show that the privately owned insurers have experienced a high productivity growth rate than the state-owned insurers.Practical implicationsThe results hold practical implications for the regulators, policymakers and decision makers of the Indian non-life insurance companies.Originality/valueThis study is the first of its kind to use FPI, which satisfies all economically relevant axioms and tests defined by the index number theory to comprehensively access the change in TFP of the Indian non-life insurance sector.

Industry level analysis of productivity growth under market imperfections

PurposeThis study aims to estimate total factor productivity (TFP) growth for the post-2008 period for selected industries in the manufacturing sector at NIC 3-digit. Total factor productivity growth (TFPG) estimates are based on the theoretical framework provided by studies such Hall (1988), Abraham et al. (2009) and Crepon et al. (2005) that incorporate market imperfection in labour and product market, thereby modifying the traditional TFP estimation as Solow Residual.Design/methodology/approachBased on the theoretical model that incorporates market imperfections in labour as well as product market in modifying the TFP estimates using the Levinsohn–Petrin framework of empirical estimation, the authors have calculated industry wise TFPG for 62 industries at NIC 3-digit level.FindingsThe study finds three distinct trends: first, there are considerable industrial disparities in productivity growth in terms of TFP. The estimates have been found to be higher than the conventional Solow Residual for most industries, indicating the role played by market imperfections in affecting the conventional measure of productivity growth. Second, estimates of bargaining power are found to be lower than those compared to the earlier estimates in Maiti (2013) for the Indian organised manufacturing case for 1998-2005. This observation is commensurate with the observation in recent years of a falling share in labour wage in total output in organised manufacturing sector. Finally, the study also found a statistically significant contribution of greater mechanisation on TFPG while an adverse effect of the rising dependence of organised manufacturing on contractual labour.Originality/valueThe role of market imperfections in measuring TFPG has been undertaken, and it has been found to be an important factor, as the estimated measures vary from the conventional measures of TFPG. Moreover, the study has considered a very recent period from 2008-2015 in estimating TFPG, as well as analysing the factors behind the trends in TFPG at industrial level.

The impact of OFDI on the performance of Chinese firms along the ‘Belt and Road’

ABSTRACTUsing feasible generalized least squares (FGLS) and ordinary least square (OLS) estimations on a dataset of 1208 outward Foreign Direct Investment (OFDI) events by Chinese-listed firms from 2004 to 2015, this paper investigated the impact of OFDI on the performance of Chinese firms, from which it was found that Chinese firms that had invested in Belt and Road Initiative (BRI) countries were more productive than those that had invested in non-BRI countries. However, OFDI by both state-owned enterprises (SOE) and non-SOE were on average found to be negatively related to productivity and profitability, with state-owned enterprises (SOEs) having worse performance in terms of total factor productivity (TFP) than non-SOEs. A further subsample analysis found that Chinese firms that were investing in developing economies were performing better than those that had invested in developed ones; firms investing in sub-regions like Middle East and South Africa, East Asia and the Pacific, Latin America and the Caribbean experienced a positive post-OFDI TFP but investment in other regions had either insignificant or negatively significant coefficients, indicating that firms in general had poor post-OFDI performances. The findings in this paper are informative for developing going-global strategies for both firms and government authorities.

Does the Same FDI Fit All? How Competition and Affiliates Characteristics Affect Parents’ Productivity

This paper investigates the heterogeneity within the group of foreign direct investors by analyzing the relation between parents’ productivity, the degree of domestic competition and the characteristics of their affiliates. Our results show that there is no unique recipe. Foreign direct investors may benefit differently depending on the economic environment in which they operate. Building an original 10-year panel dataset of Italian investors, we find that larger manufacturing parents tend to have more, larger and more productive affiliates in a higher number of destinations as well as being more productive in terms of total factor productivity. Having affiliates in high income countries or in both high and low income countries is associated with a productivity premium vis-a-vis investors in low income countries. Parent sector characteristics such as technology and degree of competition are also associated with productivity in a non-monotonic way. Low income country investors are found to be relatively more productive when operating in more competitive low technology sectors, while the opposite holds true for high income country investors, which become more productive when operating in less competitive high technology sectors.

Is Austria’s economy locked-in in the CESEE region? Austria’s competitiveness at the micro-level

This paper analyses the competitiveness of Austrian manufacturing industries by comparing the performance of Austrian firms with the Western European firms using recent estimates of total factor productivity (TFP) across Wider Europe (EU-28 plus Western Balkans) during the period 2007–2015. According to the TFP estimates, Austrian firms with larger turnovers, and less employment, in regions with less regional-industrial concentration of labour have become more competitive in terms of TFP. Using firm’s TFP and other characteristics aggregated by industries across Wider Europe, a structural gravity model for exports is estimated. In line with the Ricardian models of trade and new trade theories, results show that larger trade across countries in the sample is driven by intra-firm trade, and comparative advantages that are measured as better efficiency of industries in terms of simple average of TFP growth of firms and more allocation of capital to more efficient firms. Comparing the actual values of exports from Austria to Central, East and Southeast Europe (CESEE) with the counterfactual predicted values of the structural gravity model, I find that since 2012 excessive exports were directed to Western Europe rather than to CESEE. In a robustness check using unilateral exports value, these interesting findings also confirmed that a potential Austrian lock-in effect in the CESEE region reversed and trade diverged to the more competitive market of Western Europe.

The chosen fortunate in the urbanization process in China? Evidence from a geographic regression discontinuity study

AbstractAfter decades of delayed urbanization, since 1998, China has implemented the “county‐to‐district” policy to promote urbanization and stimulate regional economic development. This policy was designed to expand the urban area of large cities by merging counties (rural areas) with nearby cities (urban areas). Intuitively, these regions are the “chosen fortunate” since they are the privileged beneficiaries of this policy experiment. However, at the time of writing (2018), recent studies have been inconsistent regarding this issue, and several studies have revealed that this policy has impeded regional growth. Therefore, the true effect of this policy must be carefully examined. Using grid‐level nighttime light data and a border‐based regression discontinuity design framework, we find that the average effect of the “county‐to‐district” policy on nighttime light growth is significant and positive, and this result also coincides with the increase of entry and decrease of exit of manufacturing enterprises, and the increase of the county‐level manufacturing employment. However, the policy effect on nighttime light turns to be negative in the long run, implying that short‐term economic growth may outweigh the long‐term economic growth potential. A further investigation of the underlying mechanism indicates that industrial enterprises in the experimental policy area do not perform better in terms of total factor productivity (TFP) and profit margin than their counterparts. Moreover, this policy aggravates the polarization between central and border areas.

Financial Constraints: State Aid to the Rescue? Empirical Evidence from Belgian Firm-Level Data

This paper investigates the relationship between State aid measures, as defined by Article 107 of the Treaty on the Functioning of the European Union (TFEU), and firm performance in terms of total factor productivity (TFP). Under imperfect capital markets, firms might encounter difficulties in accessing sufficient resources to fund their optimal investment plans. The main focus of this paper lies in establishing whether State aid alleviates a firm from such constraints, and thereby enhances its productivity. To this end, we include all State aid cases that were active in Belgian manufacturing between 2003 and 2012. To determine the effects of State aid and financing constraints on performance, we first estimate TFP and classify firms according to their financial health in the absence of aid. The main results confirm the hypothesis, but when allowing for firm heterogeneity, a mitigating role for State aid is only present for initially well-performing firms.

The Development and Prospect of Economic Growth Theory

The development of economic growth theory has gone through three important stages, namely, classical economic growth theory stage, neoclassical economic growth theory stage and new economic growth theory stage, is now moving in a diversified direction. Economic growth plays an important role in terms of total factor productivity, development (R & D), institutional aspects, economic structure, financial aspects, and convergence of economic growth and so on. At each stage, the theory of economic growth is rich in the results of previous studies, and will combine economic growth with the existing problems in society at that time, trying to solve the problem from economic growth. Through an overview of scholars' theories and examples of economic growth, it has an important role in solving practical problems and has a guiding significance for promoting economic growth.

Total factor productivity convergence across the Kazakh regions

This article examines total factor productivity (TFP) convergence across the regions of Kazakhstan over the period of 1997–2013. Using a growth accounting methodology we found that the average level of TFP fell by almost 40% over the period under consideration. Several panel unit root tests confirm that the whole set of Kazakh regions and the group of non-oil regions converged in terms of TFP, while the group of oil-rich regions diverged. This result explains sigma-divergence of the GRP per capita across the regions of Kazakhstan by divergence in capital intensity.

Wage, foreign-owned firms, and productivity spillovers via labour turnover: a non-linear analysis based on Chinese firm-level data

ABSTRACTUsing firm-level panel data from Chinese manufacturing firms over the period 2004–2007, this article investigates the impact of the wage gap between local and foreign-owned firms on foreign direct investment (FDI) spillovers in terms of total factor productivity (TFP). We find a non-linear threshold effect that: a low-level wage gap threshold exists, below which FDI spillovers are significantly negative. This is because FDI spillovers via labour turnover are blocked due to the low wages of local firms, which jeopardizes the flow of skilled workers from foreign firms to local firms. In contrast, when the wage gap reaches a high-level threshold, local firms can get benefits from FDI spillovers. The reason is that high wages of local firms attract skilled employees to leave foreign firms, which yields a large magnitude of worker mobility from foreign firms to local firms. Our article provides evidence that labour turnover as the channel of FDI spillovers only works when the wage gap is beyond some threshold. Also, these thresholds vary across regions and firm ownerships.

Do local industrial agglomeration and foreign direct investment to China enhance the productivity of Taiwanese firms?

This article examines the impacts of industrial agglomeration and outward foreign direct investment (OFDI) on the total factor productivity (TFP) of Taiwanese firms. A vertical FDI-based model of heterogeneous firms is proposed to analyze how agglomeration economies and technology incompatibilities between parent firms and their affiliates can affect firm productivity. This model suggests that firms located in areas with more concentrated industrial agglomerations are more productive, while those engaging in OFDI may not perform better in terms of TFP. Using plant-level data, this article constructs an indicator of industrial agglomeration to appraise agglomeration economies on firm productivity. Based on the data for 578 manufacturing firms and the agglomeration indicator, we estimate a cross-sectional econometric model to empirically assess the productivity effects of industrial agglomeration and OFDI. The empirical results show that local industrial agglomerations exert a positive contribution to firm productivity, but that FDI in China has no significant effects on Taiwanese firms' TFP.

What Drives Firm Growth? Comparing Factors of Intensive and Extensive Firm Growth

This paper compares the determinants of firm’s extensive and intensive growth based on population data of manufacturing firms registered in Slovenia in the 1994-2003 period. The former is measured in terms of employment and the latter is defined in terms of total factor productivity. After controlling for possible endogeneity of explanatory variables and accounting for growth persistence a firm’s extensive growth is found to be stronger in younger and more productive firms, using more capital intensive technology and exporting larger share of their output. Intensive growth is also more pronounced in firms with more capital intensive but it is characterized with inverted U-shaped relationship with its size. However, significant differences among the factors of intensive and extensive firm growth are revealed, especially with respect to industry-specific factors. The industry-level markup size and intra-industry concentration of foreign firms affect significantly only the intensive firm growth, while firm’s age and its export orientation are found to be important factors only for the firm’s extensive growth. The results support the great importance of external factors for firm’s learning process and, consequently its TFP growth, in particular competitive pressure in the market and foreign firms’ presence rather than ability of learning through firm’s own exporting activity or from its eventual foreign owner.

Asymmetric trade protection leading not to productivity but to export share change

AbstractThis article revisits a classical theme in economics, that is, the relationship between trade protection and economic performance, with an improved treatment of the endogeneity of tariffs and with consideration of alternative performance criteria. This paper also considers the effects of asymmetric protection, such as higher tariffs on consumer goods and lower tariffs on producer goods. Using sectoral data on Korean manufacturing during the period from 1967 to 1993, this study finds that the effect of trade protection by tariff tends to show up not in terms of total factor productivity but in terms of revealed comparative advantage and export shares of sectors. Such an effect tends to be greater in consumer goods, which are the main targets of promotion by higher tariffs. This study verifies the potentially positive role of tariffs under certain conditions, especially under discipline from world markets.