DO UNIONS IMPACT EFFICIENCY?: EVIDENCE FROM THE U.S. MANUFACTURING SECTOR

This study investigates the impact of labor unions on productivity and technical inefficiency of the U.S. manufacturing sector, using state‐level panel data on 48 states from 1983 to 1996. The results indicate that while labor unions reduce firms' technical progress, they improve firm efficiency in utilizing the existing technology. The findings also suggest that the decline of unionization rate in the sample period impaired firms' technical efficiency by 2.4 percentage points. (JEL C33, C51, O51, J51)     

Scale and efficiency measurement using a semiparametric stochastic frontier model: evidence from the U.S. commercial banks

In this paper, we use the local maximum likelihood (LML) method proposed by Kumbhakar et al. (J Econom, 2007) to estimate stochastic cost frontier models for a sample of 3,691 U.S. commercial banks. This method relaxes several deficiencies in the econometric estimation of frontier functions. In particular, we relax the assumption that all banks share the same production technology and provide bank-specific measures of returns to scale and cost inefficiency. The LML method is applied to estimate the cost frontiers in which a truncated normal distribution is used to model technical inefficiency. This formulation allows the cost frontier, inefficiency effects and heteroskedasticity in both noise and inefficiency components to be quite flexible.      

Shadow prices and pollution costs in U.S. agriculture

We use the directional output distance function to derive estimates of production inefficiency, shadow prices for polluting outputs, and the associated pollution costs. Using a quadratic functional form for the directional output distance function and data for the U.S. agricultural sector during 1960–1996, we find that the pollution costs (the shadow values) from the runoff and leaching of pesticides are 6% of crop and animal revenues and are highest in the Midwest and lowest in the Western states. If states were to reduce technical inefficiency and operate on the production frontier, pollution costs could be reduced by 7%.     

基于数据包络分析的综合类生态工业园区环境绩效研究

采用数据包络分析法对中国24家综合类生态工业园环境绩效进行实证研究,研究表明:整体而言,园区环境效率非有效性主要来自纯技术非有效性,次要来自规模非有效性。各园区在环境绩效上存在较大差异,通过验收的国家生态工业示范园区在环境绩效上并无明显优势。大部分经济体量大的园区需要适当控制规模提升效率。研究还为园区未来环境调控提出定量化的调整建议,为未来我国深入推进生态工业园建设提供参考。     

Stochastic Cost Frontier and Inefficiency Estimates of Public and Private Universities: Does Government Matter?

Stochastic frontier analysis is used to estimate operating cost inefficiencies of public and private non-profit universities in the U.S. while also accounting for the possible effects arising from differences in the degree of government ownership. Using panel data for four academic years, 2005?C2009, inefficiencies are estimated under two model specifications. Results indicate that public universities are more cost efficient when environmental factors influence cost frontiers but private universities are the cost efficient institutions when those factors are determinants of inefficiency. Increased government funding does matter and increases private sector inefficiency but offers some efficiency improvements among public universities. Following the global financial crisis, there is evidence indicating a considerable slowdown in the inefficiency growth among both public and private universities.     

The measurement of environmental economic inefficiency with pollution-generating technologies

This study introduces the measurement of environmental inefficiency from an economic perspective. We develop our proposal using the latest by-production models that consider two separate and parallel technologies: a standard technology generating good outputs, and a polluting technology for the by-production of bad outputs. While research into environmental inefficiency incorporating undesirable or bad outputs from a technological perspective is well established, no significant attempts have been made to extend it to the economic sphere. Based on the definition of net profits, we develop an economic inefficiency measure that accounts for suboptimal behavior in the form of foregone private revenue and environmental cost excess. We show that economic inefficiency can be consistently decomposed according to technical and allocative criteria, considering the two separate technologies and market prices, respectively. We illustrate the empirical implementation of our approach using a dataset on agriculture at the level of US states.     

Allocative inefficiency and sectoral allocation of labor: Evidence from U.S. agriculture

Are productivity differences across producers in an industry a good indicator of allocative inefficiency? If so, what are the welfare consequences of reallocating labor from lesser to more productive producers? This paper addresses these questions in the context of factor specificity, which generates endogenous distribution of total factor productivity across producers, and reallocation of labor across sectors, as well as within a sector. The paper builds a multi-sector, multi-region general equilibrium model with land as a region-specific factor, and calibrates it using state-level U.S. data from 1960 to 2004, a period with considerable reallocation of labor out of agriculture. The results show that large and persistent differences in agricultural productivity across U.S. states are consistent with factor specificity due to geoclimatic conditions and do not correspond to economically significant allocative inefficiencies.     

Human capital effects on technical inefficiency: a stochastic frontier analysis across industries of the Greek economy

In this paper we examine the impact of human capital on technical inefficiency. A stochastic production frontier is simultaneously estimated with a technical inefficiency model using data from one-digit industries of the Greek economy, for the period 2000–2005. The results indicate a significantly negative impact of human capital on technical inefficiency, which is comparatively lower in magnitude for the sector of public services. The most efficient industries of the Greek economy are those of Education, Financial intermediation and Real estate, renting & business activities. The highest contribution of human capital on technical efficiency is observed in the industries of Health, Education and Real estate, renting & business activities.     

Technical efficiency under alternative environmental regulatory regimes: The case of Dutch horticulture

We consider the performance of small and medium sized enterprises in Dutch horticulture under different environmental policy regimes across time. We address the question whether technical performance differs under these alternative regulatory regimes to test Porter's hypothesis that stricter environmental regulation reduces technical inefficiency. For this purpose, we use a stochastic production frontier framework allowing for inclusion of policy variables to measure the effect of alternative environmental policy regimes on firms' performance. The main result is that stricter environmental policy regimes have indeed reduced technical inefficiencies in Dutch horticulture. The estimation results indicate amongst others that the 1997 agreement on energy, nutrient and pesticides use enhances technical efficiency. Firms under the strict environmental policy regime are found to be more technically efficient than those under a lax regime, thereby supporting the claims by Porter and Van der Linde (Porter, M., Van der Linde, C., 1995. Green and Competitive: Ending the stalemate. Harvard Business Review 73, pp. 120-137) concerning Dutch horticulture.     

Cost-effective design of agri-environmental payment programs: U.S. experience in theory and practice

Key features of U.S. agri-environmental programs are reviewed and analyzed using literature review and program data. We focus, in particular, on several key questions: Has benefit-cost targeting increased the environmental benefit obtained from program budgets? Has competitive bidding reduced program costs? To what extent have these program designs resulted in additional gain (that would not have otherwise been obtained)? Previous research illustrates how benefit-cost targeting using environmental indices (such as the Environmental Benefits Index in the Conservation Reserve Program) can increase environmental cost-effectiveness. Previous research and data from two U.S. programs suggests that bidding has reduced costs, but that the full potential of bidding may not have been realized. Finally, most U.S. programs are intended to yield environmental gains that would not have otherwise been obtained, but sometimes fall short of this goal.     

Public Sector Capital and the Production Efficiency of U.S. Regional Manufacturing Industries

This paper applies a stochastic frontier production model with time-varying technical efficiency to investigate the relationship between public capital and technical efficiency. It is based on the proposition that public capital has an effect on actual output by enhancing technical efficiency, thereby reducing the gap between maximum potential output and actual output. Empirical results using panel data from U.S. state manufacturing industries during 1969–86 show that technical efficiencies varied substantially, both between states and between years; variations in technical efficiency are significantly explained by variations in public-sector capital.
JEL Classification Numbers: O20, H54, C23.     

Labour Market Inefficiency and Frictional Unemployment in Australia and its States: A Stochastic Frontier Approach

This paper provides estimates of labour market inefficiency and the frictional unemployment rate for Australia and its States over the period January 1978 to December 1997. These estimates are derived from parametric statistical models of employment growth in which technical inefficiencies are accounted for. The mean estimate of the (technically efficient) frictional unemployment rate for Australia over the sample period is S3 per cent of the labour force. Technical inefficiency in the labour market matching process is significant and contributes around 13 per cent to the mean steady-state (naturaľ) unemployment rate. Investigation of the factors explaining the levels of inefficiency suggests that inefficiencies vary countercyclical, are related to which political party is in power and the time of year and that only Western Australia and Queensland have exhibited a significant decline in inefficiency over the period.     

Is there a relation between labor investment inefficiency and corporate tax avoidance?

This paper investigates the relation between labor investment inefficiency and corporate tax avoidance. Employing a large sample of 61,542 U.S. firm-year observations over the 1962–2014 period, our regression results show that labor investment inefficiency is significantly positively related to tax avoidance. More specifically, we find that a one standard deviation of labor investment inefficiency leads to a 0.71% reduction in the accounting effective tax rate. Our findings are robust to endogeneity concerns, alternative proxy measures of tax avoidance and labor investment efficiency, and additional control variables pertaining to accounting quality and managerial ability. Taken together, our regression results show that labor investment inefficiency is an important determinant of corporate tax avoidance.     

Sources of investment inefficiency: The case of fixed-asset investment in China

This study attempts to measure the inefficiency associated with aggregate investment in a transitional economy. The inefficiency is decomposed into allocative and technical inefficiency based on standard production theory. Allocative inefficiency is measured by the deviation of actual investment from the theoretically desired investment demand. Institutional factors are then identified as part of the driving force of the deviation. The resulting model is applied to Chinese provincial panel data. The main findings are: Chinese investment demand is strongly receptive to expansionary fiscal policies and inter-provincial network effects; the tendency of over-investment remains, even with signs of increasing allocative efficiency and improving technical efficiency.     

Dynamic productivity growth and its determinants in the Indonesian food and beverages industry

ABSTRACT

This research investigates dynamic productivity growth and its determinants in the Indonesian food and beverages industry decomposing dynamic productivity growth into the contributions of dynamic technical inefficiency change, dynamic technical change, and dynamic scale inefficiency change. The empirical application employs unbalanced panel data of 44 subsectors in the Indonesian food and beverages industry over 1990–2014. To estimate dynamic productivity growth, this research uses a Luenberger indicator accounting for the presence of adjustment costs. The results show that dynamic productivity growth exhibits a decreasing trend. Dynamic technical inefficiency change and dynamic scale inefficiency change contribute positively to dynamic productivity growth, while dynamic technical change contributes negatively. Dynamic productivity growth is affected by the change in industrial concentration, the growth rate of capital intensity, the growth rate of exports, the growth rate of foreign direct investment, and location.     

Credit market discipline: Theory and evidence

Popular in the academic literature and financial press, the credit market discipline hypothesis holds that credit markets, through risk premia increasing in debt level, constrain governments from borrowing and thus, impose fiscal discipline on sovereign borrowers. While several papers document rising risk premia, none have investigated the consumption response. This paper fills this gap by using data on U.S. states' risk premia from 1973–98. An optimizing model is formulated, whereby states intertemporally smooth consumption in the face of interest rates which increase with debt. Deviations from optimality are considered by allowing for governments which consume out of contemporaneous resources. In both cases, credit market discipline is rejected. Rejection is robust to sample splits based on ideology and the stringency of balanced budget requirments.     

Technological progress and factor substitution in the U.S. Textile industry, 1949–1974

Using the translog dual cost function approach, we estimate the elasticity of substitution and the nature of technical change in the U.S. textile industry. A significant extension on the existing studies on this topic is the incorporation of learning by doing as a source of technical change. Our results confirm earlier findings of limited substitution possibilities between capital and labour and that factor argumenting technical change is labour saving and capital using in the Hicksian sense. But this augmentation takes placeboth due to time and learning and further that bias due to the two factors is in the opposite direction.     

Bus transit technical efficiency using latent class stochastic indirect production frontier

Using an Indirect Production Frontier (IPF), this article examines technical inefficiency within a latent class framework while simultaneously accounting for allocative distortions from operating and capital subsidies. It identifies two latent classes of US public transit systems, one characterized by economies of scale with 16.61% technical inefficiency and the other by diseconomies of scale with 14.16% technical inefficiency. It decomposes technical inefficiency among some of its sources and finds that the incentive tier of federal operating subsidies, regulations regarding years of vehicle use, subsidy-induced allocative distortion from labour overuse relative to capital negatively influence technical inefficiency in all transit systems. For the Latent Class 1 transit systems, the sources of lower technical inefficiency are operating speed, purchased transportation and years-of-vehicle-use regulation. For the Latent Class 2 transit systems, these sources are subsidy-induced capital-labour allocative distortion and the incentive tier component of the federal formula grant.     

Farm household efficiency in Bangladesh: a comparison of stochastic frontier and DEA methods

This study compares estimates of technical efficiency obtained from the stochastic frontier approach and the Data Envelopment Analysis (DEA) approach using farm-level survey data for rice farmers in Bangladesh. Technical inefficiency effects are modelled as a function of farm-specific socioeconomic factors, environmental factors and irrigation infrastructure. The results from both the approaches indicate that efficiency is significantly influenced by the factors measuring environmental degradation and irrigation infrastructure.     

Government Interventions, Market Imperfections, and Technical Inefficiency in a Mixed Economy: A Case Study of Indian Agriculture

This paper uses an output-maximizing framework in the presence of expenditure constraint to measure output loss and input misallocation resulting from market distortions and technical inefficiency. A generalized indirect production function accommodating allocative distortions and technical inefficiency is used. Allocative distortions are captured in terms of effective (shadow) prices in which distortion parameters are both farm- and input-specific. The stochastic frontier approach is used to model technical inefficiency. Using farm-level data on 105 jute growers from West Bengal, India, we find that average output losses due to allocative distortions and technical inefficiency are 6.3% and 14%, respectively.