Total Factor Productivity Research Articles

From policy to practice: Enhancing enterprise productivity through energy transition initiatives

This study investigates the impact of energy transition policies on enterprise Total Factor Productivity (TFP) in China, utilizing a quasi-natural experiment with New Energy Demonstration Cities (NEDC) and panel data from Chinese cities and manufacturing enterprises (2011–2021). Using the difference-in-difference method, the analysis reveals that energy transition policies positively affect enterprise TFP, especially in non-resource-based cities, less polluting industries, and enterprises with strong Environmental, Social, and Governance (ESG) performance. The research identifies two key mechanisms driving productivity gains: green innovation and reduced financing costs. Additionally, it examines the role of Environmental Regulation (ER), finding that formal ER can mitigate the positive impact of energy transition policies on enterprise TFP, while informal ER has a reinforcing effect. This study contributes to the broader understanding of the policy implications of energy transitions, highlighting the nuanced effects of different regulatory environments on enterprise development and providing evidence on sustainable growth in the context of climate imperatives. The findings offer insights into the complex dynamics between energy policy and industrial productivity, relevant to policymakers, industries, and stakeholders interested in the interplay between energy transition and economic sustainability.

Granular origins of the Chinese business cycle

ABSTRACT Recent events in China, like Foxconn’s factory downsizing and Evergrande’s bankruptcy, have significantly impacted regional economies, highlighting how idiosyncratic shocks from large firms can generate aggregate effects. Using the ‘granular hypothesis’, which posits a significant impact of large firms’ actions on the macroeconomy, this study investigates how idiosyncratic shocks from large Chinese firms affect regional productivity growth and markups. Our findings demonstrate that idiosyncratic shocks to the 100 largest firms per province significantly impact regional labour productivity and total factor productivity growth but not gross regional domestic product growth. Subsequently, we examine how idiosyncratic shocks impact product market distortions, revealing that idiosyncratic shocks to large firms increase markups in regional markets, suggesting amplified market power.

Enhancing environmental quality and economic growth through potential effects of energy efficiency and renewable energy in Asian economies

This study examines the potential impacts of energy efficiency and renewable energy on economic growth proxies by gross domestic product and environmental quality proxies by carbon dioxide emissions across eight selected Asian countries from 2000 to 2020. This study contributes by calculating green total factor productivity and carbon total factor productivity based on the famous Solow’s residual via employing a modified extensive growth accounting model that internalized ignored factors such as energy efficiency and renewable energy. The employed panel cointegration techniques confirm that all variables are co-integrated with carbon dioxide emissions and economic growth. The pooled mean group/autoregressive distributed lag model analysis results indicate that energy efficiency is positively associated with both environmental quality and economic growth. Renewable energy hurts economic growth but has a positive effect on environmental quality which suggests the necessity of implementing an effective strategy for renewable energy alongside energy efficiency measures to enhance economic growth and environmental quality in the selected Asian countries. The findings from the fully modified ordinary least squares estimator are consistent with the environmental quality model. The average growth rate of green total factor productivity is positive despite negative contributions from energy efficiency and renewable energy. Similarly, the average growth rate of carbon total factor productivity is negative despite positive contributions from labor and capital. This discrepancy may be attributed to the beneficial effects of labor and capital as input productivity-driven. Embracing renewable energy sources can take significant steps toward improving environmental quality for future generations. Focusing on green technologies that enhance energy efficiency can substantially promote environmental quality and stimulate sustainable economic growth through innovation and climate change integration to achieve Sustainable Development Goals.

Lessons from the Pilot Project of Korean ETS on the Local Landscape of Economy

For a sustainable landscape of local economies, many researchers have emphasized the importance of field-oriented differentiation in government policies. In particular, the Paris Agreement, based on the bottom-up approach, aims to maximize the participation of all economic agents, in contrast to the top-down approach of the Tokyo Protocol. In response to these global paradigm shifts in the local landscape, local governments in Korea have made significant efforts to adapt to sustainable development during the pilot phase of emission trading scheme (ETS), during the period from 2015 to 2020. This study evaluates the performance of these local government policies in the transition to a carbon-zero economy. Using the general non-radial directional distance function (GNDDF), we found that Gyeongsang Province demonstrated enhanced environmental total factor productivity (TFP) during the pilot project, whereas the Seoul metropolitan area lagged behind due to a lack of governance. As the economic center of Korea, Seoul showed poor environmental performance because of the arbitrary elimination of green belt areas and unchecked land development, resulting in environmental degradation, a trend common in many developing countries facing climate adaptation challenges. To address these urbanization issues, this study concludes that a balanced approach combining stricter regulations with market-oriented promotional incentives is essential for optimizing the transition of local economies to a sustainable landscape.

Labour market skills, endogenous productivity and business cycles

This paper analyses how labour market heterogeneity affects unemployment, productivity and business cycle dynamics. To this aim, we set up a model with asymmetric search and matching frictions across skilled and unskilled workers, and endogenous productivity through R&D investment and intangible capital accumulation. Skill mismatch and skill-specific labour market institutions have three main effects on business cycles and growth dynamics. First, the relative scarcity of skilled workers increases the natural rate of unemployment and reduces total factor productivity with long-run effects on the growth rate of output. Second, skill heterogeneity in the labour market generates asymmetric outcomes and amplifies measures of employment, wages and consumption inequality. Finally, the model provides important insights for the Phillips and Beveridge curves. Incorporating skill heterogeneity leads to a flattening of the Phillips curve as wages and unemployment respond unevenly across skill types. Also, the model generates sideward shifts of the Beveridge curve following business cycle shocks, with the extent of these shifts depending on the degree of skill heterogeneity.

Assessment of soybean productivity and its changing factors in Japan based on the production cost statistics

Soybean (Glycine max [L.] Merr.) yields have remained below 2.0 t ha–1 for over 30 years in Asian countries, indicating long-term stagnation in productivity and production technology. This study aimed to measure the total factor productivity (TFP) of soybean production in Japan and to assess the factors affecting TFP and yield. The Färe–Primont index of TFP was measured for two agroclimatic regions using soybean production cost statistics from 1987 to 2015 to analyze the regression of TFP and yield with per-farm land size, time trends, and production-related input variables. The TFP increased by 1.5–2.4% annually in the two regions, despite an annual decrease of 0.7% in country’s average yield. The TFP in the subarctic Hokkaido region improved by 9–15% due to the land-size increase and progress of time, i.e., technological progress, during the period. While in the temperate main-island region, a 14% TFP increase induced by increased land size was largely offset by the time–progress effect (–11%), i.e., technological retrogression. Similar time–progress effects observed on yield indicated that technological changes occurred, with respect to cultivation methods. The TFP–improving land-size increase adversely resulted in a 9% yield decrease in the main-island region accounting for 85% of soybean cultivation area in Japan. The results further showed that TFP improved by saving production inputs, such as fertilizer, per unit area in both regions, and the yield rose with increased inputs in seed, agrochemicals, and rental services, depending on the region. This study revealed continual soybean TFP improvements across Japan due to land-size increases and input saving in addition to the regionally biased progress in cultivation technologies. The implications of the results are discussed from the perspective of improving TFP and yield while increasing the per-farm land size.

Does oil price uncertainty affect corporate total factor productivity? Evidence from China

In the era of high-quality economic development, oil price volatility (OVX) and the total factor productivity (TFP) of corporations are pivotal issues for both policymakers and scholars. This study leverages the implied volatility of oil prices and financial data from Chinese listed industrial companies spanning 2010 to 2022 to investigate the influence of OVX on firms’ TFP and the underlying mechanisms. The findings reveal that OVX substantially dampens firms’ TFP, with corporate leverage and financialization identified as key channels through which this impact occurs. Further heterogeneity analysis indicates that the negative impact of OVX on TFP is particularly pronounced in firms operating in industries with low concentration and among small and medium-sized enterprises (SMEs). The extension analysis suggests a threshold effect in the relationship between OVX and corporate TFP, with the suppressive effect of OVX on TFP intensifying as the level of corporate financialization increases. Consequently, it is imperative for policymakers to closely monitor oil price fluctuations and implement timely strategies to mitigate the risks associated with OVX.

Bedeutung und Entwicklung der Produktivität

Abstract Labour productivity is an important determinant of competitiveness. for competitiveness. It is significantly influenced by the total factor productivity. In Austria, as in most other industrialized countries, growth in labour productivity and total factor productivity has considerably in recent decades. The starting points for reviving productivity growth are the promotion of investment and research and development as well as strengthening competition and the risk capital market.

Decentralization of land development approval and economic impacts: A study on China's urban construction land reform

This paper explores how China's reform of the urban construction land approval system, which decentralized authority to provincial governments, affects enterprise total factor productivity (TFP) using a quasi-natural experiment approach. The reform streamlined processes, reduced legal ambiguities, and enhanced resource efficiency. Our findings indicate significant TFP gains primarily due to lower administrative costs and improved legal frameworks, emphasizing the pivotal role of regional governance and legal enforcement in economic outcomes. Additionally, the analysis highlights substantial TFP enhancements from reduced inefficient investments and financing constraints, with notable regional and enterprise-specific variations in the impact of legal reform.

How does data factor utilization stimulate corporate total factor productivity: A discussion of the productivity paradox

Stimulating total factor productivity through the utilization of data factors is a crucial concern for companies operating in the digital era. This study employs data from A-share listed firms from 2011 to 2022 to examine the impact and mechanisms of data utilization on corporate total factor productivity. The findings reveal that effective data utilization can significantly improve corporate total factor productivity, but no evidence supports the productivity dilemma. The stimulating effects are achieved by alleviating investment inefficiency and resource redundancy. Further analysis verifies that firms` financial performance and life cycle can lead to heterogeneous effects. Specifically, the positive impact is more pronounced in firms with lower operational performance and in periods of maturity and recession.

Horizontal and vertical foreign direct investment linkages, absorptive capacity and domestic investment: evidence from Indonesian plant-level data

PurposeThis study examines the effect of horizontal and vertical foreign direct investment (FDI) linkages on the investment decisions of domestic plants. It explores this link for plants in a developing country, where the dynamics of FDI spillovers on domestic investment choices are distinct from those in developed countries. It also adds to the literature by examining the role the absorptive capacity of plants plays in this nexus, enriching our understanding of the interaction between FDI and the investment choices of domestic plants and providing insights for policymakers and managers seeking to maximize the positive effects of FDI spillovers.Design/methodology/approachThis study specifies the dynamic investment equation using the Euler and Q models. This equation is estimated using the first-difference and system generalized method of moments GMM estimators, which allow us to address persistency, endogeneity and unobserved plant-specific effects. FDI exposure proxy, calculated by weighing the FDI engagement variable by firm size, captures the strength of foreign equity participation in an industry and time. Input–output (IO) tables are used to calculate the proxies for horizontal and vertical (backward and forward) FDI. Total factor productivity is calculated using a method advocated by Olley and Pakes (1996) that allows us to control for selection and simultaneity.FindingsWe find that FDI inflows into both the domestic plants’ own industry and the input-supplying industry significantly boost the capital accumulation of the average domestic plants. Differentiating plants based on their absorptive capacities reveals that the presence of foreign firms significantly increases capital deepening for domestic plants with high absorptive capacity within their own industry (horizontal linkage) and in industries that supply inputs to the FDI-exposed industry (backward linkage). However, it leads to a decrease in capital deepening for high absorptive capacity domestic plants in industries using inputs produced by the industry exposed to FDI (forward linkage).Research limitations/implicationsThese findings have implications for policymakers and managers who aim to design incentives to maximize the positive spillover effect of horizontal and vertical FDI linkages on the capital deepening of domestic plants. Exploring additional mechanisms that could play a role in this nexus, separately for plants in different industries (such as the industries in which the country has a comparative advantage), may be fruitful.Originality/valueTo our knowledge, the relationship between the investment behavior of the domestic plants and FDI linkages has not been examined for a developing country. It is useful to explore this link in developing countries, as the investment choices of plants in these nations may be impacted differently by FDI spillovers than those in advanced nations. This study further contributes to the literature by investigating whether the plants’ absorptive capacity affects the nexus between FDI linkages and investment decisions of the domestic plants. The findings are valuable for policymakers and managers who aim to increase plants’ capital accumulation in developing countries.

Evaluation and convergence analysis of science and technology innovation efficiency in China’s national central cities based on the super-efficiency SBM-ML model

ABSTRACT Scientific and Technological Innovation (STI) is an important driving force for economic development and social progress. National central cities are the main connection points of China’s economic activity network and play a leading role in the national economic development of the country. In order to explore the efficiency of STI and the convergence characteristics of STI in China’s national central cities, this paper selects S&T innovation input-output indicators and constructs a system of indicators for high-quality economic development. It measures the STI innovation efficiency of China’s national central cities by combining with the super-efficiency SBM-ML model and then constructs a model to analyze its convergence situation. The results of the study show that: from 2011 to 2021, the STI efficiency of China’s national central cities has reached an effective level, and the overall trend has increased; the total factor productivity of STI in China’s national central cities has obvious differences, with Beijing having the highest total factor productivity, while Shanghai has the lowest; the STI innovation efficiency of China’s national central cities exhibits both absolute β-convergence and conditional β-convergence, but there is no significant α convergence, and regional differences are obvious.

A new approach for estimating trade elasticities and measuring the productivity effects associated with trade

Although there is an extensive literature on the measurement of total factor productivity (TFP) and its decomposition, the benefits of international trade for aggregate TFP have been less frequently studied. Combining the theoretical trade models and the so-called proxy-variable approach, this paper provides a new method for estimating trade elasticities based on a production model where trade elasticities and technological parameters are estimated simultaneously. Our proposed model is used to analyse the main determinants of the degrees of openness (embeddedness) of countries and sectors. Using data from the World Input-Output Database, we find that the pecuniary productivity gains attributable to embeddedness tend, on average, to offset its effect on sectors’ underlying productivity. We also use the model to measure the different factors affecting productivity changes due to the Covid-19 pandemic. We find that the trade-related consequences are important in explaining the contraction in countries’ productions.

The local government fiscal pressure's effect on green total factor productivity: Exploring mechanisms from the perspective of government behavior

The local government fiscal pressure's effect on green total factor productivity: Exploring mechanisms from the perspective of government behavior

Intellectual property protection and total factor productivity of enterprises: A quasi-natural experiment of intellectual property courts

This study reveals that the establishment of intellectual property courts can significantly improve the TFP of enterprises. After a series of robustness tests, the conclusion is still valid. Mechanistic research finds that the establishment of intellectual property courts can promote TFP of enterprises by strengthening regional law enforcement, improving the quality of enterprise innovation, and enhancing the regional business environment. Intellectual property rights protection has heterogeneous effects on different ownership types, enterprise sizes, and product competitive position. Intellectual property protection is highly important for improving the total factor productivity of enterprises and achieving high-quality economic development.

Spatiotemporal coupling analysis between green total factor productivity and urban e-commerce development in China’s eight urban clusters

The coordinated development of urban e-commerce and green total factor productivity (GTFP) plays a crucial role in achieving high-quality development. This paper selects relevant data from the eight major urban agglomerations in China for research. A model that described the coupling coordination between the regions’ GTFP and urban e-commerce was presented. Then, unfold the spatiotemporal evolution characteristics of their coupling coordination from the “dynamic and static”, “overall and regional” dimensions. The results indicate: (1) The coupling coordination degree between two systems within China’s eight urban agglomerations exhibits an upward trend with fluctuations, transitioning from a state of near dysfunction to good coordination. (2) The spatial heterogeneity in the coupling coordination degree between the two systems in China’s eight major urban agglomerations is evident, with an overall downward trend and exhibiting a “V-shaped” pattern of “decline-rise”.(3) The coupling coordination degree between two systems across China’s eight urban agglomerations exhibits a trend toward centralization, with an amelioration of bipolar differentiation, and a progressive attenuation of spatial heterogeneity.

Research on the impact and mechanism of digital economy on China’s urban green total factor productivity

Green and sustainable development is unstoppable. The digital economy has driven great changes in production methods and has become a key strength in reshaping global economic structure and achieving sustainable development. Cities are both the mainstay of economic growth and the main source of various environmental pollution problems. Therefore, studying the relationship between urban digital economy and urban green total factor productivity is of great significance. Based on panel data from 252 cities in China 2011–2019, a two-way fixed effects model was used to examine the impact of urban digital economy on urban green total factor productivity. The empirical results indicate that: (1) Urban digital economy has a significant positive impact on urban green total factor productivity. (2) Urban technological-innovation-level and human-capital-structure of play a mediating role in the impact. (3) This impact has regional heterogeneity and resource-based type heterogeneity. The research conclusions are not only valuable supplements to previous research, but also providing reliable instructions for implementing a flexible digital economy policy.

How green governance empowers high-quality development: An EKC framework-based analysis of ESG and green total factor productivity.

High-quality development represents a fundamental shift in China's economy from scale and speed to quality and efficiency. In this transition, environmental, social, and governance (ESG) practices are not only closely integrated with China's development strategy but have also become a core standard for measuring development quality. Nevertheless, research on how ESG practices specifically promote high-quality development in Chinese enterprises remains limited. Based on the environmental Kuznets curve (EKC) theory framework, this study uses data from the Huazheng ESG Index from 2009 to 2022 and employs fixed effect models, mediation effect models, and heterogeneity analysis to examine the specific impact of China's ESG practices on corporate high-quality development from multiple dimensions. The results show that there is a "U-shaped" relationship between the ESG practices of Chinese listed companies and green total factor productivity (GTFP). Initially, improving ESG practices may temporarily suppress GTFP, but as ESG levels further improve, they exhibit a significant positive impact on GTFP. Corporations significantly boost productivity by alleviating financing constraints and promoting green technological innovation, although the direct impact on technological advancement remains relatively limited. In China's western regions and industries such as manufacturing, electricity, heat, gas, and water production and supply, wholesale and retail, and information transmission, software, and information technology services, the positive effects of ESG on GTFP are particularly evident. Based on these findings, it is recommended that governments and financial institutions collaborate to promote green credit policies and increase support for the research and development of green technologies. Additionally, environmental education and resource use optimization should be strengthened, especially in industries such as agriculture, forestry, animal husbandry, and fisheries, and the exchange of ESG technologies and experiences between industries should be encouraged.

Air pollution and the digital transformation

This paper examines whether air pollution increases the digital transformation of companies. Using observations of 18,101 firm-years from China over 2014-2021, we find a positive relation between air pollution and firms’ digital transformation. Our findings are robust to a battery of endogeneity tests and robustness tests. Moreover, the impact of air pollution on digital transformation is more responsive to companies that are labor-intensive, generate lower profits per capita, and pay less per capita. Additional analysis shows that digital transformation to combat air pollution can increase total factor productivity in companies. In general, we emphasize that companies mitigate the negative impact of air pollution on the productivity of their workforce and labour costs through digital transformation.

The Elasticity of Aggregate Output with Respect to Capital and Labor

It is often assumed that the elasticity of GDP with respect to capital is one-third, but this assumes zero markups and an aggregate production function. I estimate the elasticity allowing markups to vary by industry and with a rich input-output structure. Assumptions about capital costs provide bounds on elasticity. In the United States from 1948–1995, the capital elasticity ranged from 0.19–0.32 and shifted to 0. 24–0.37 by 1996–2018. Excluding housing or decapitalizing intellectual property lowers bounds to as low as 0. 11–0.26. Based on these elasticities, common estimates of total factor productivity growth represent a lower bound. (JEL E13, E22, E23, E25, N12)