A Luenberger-Hicks-Moorsteen productivity indicator: its relation to the Hicks-Moorsteen productivity index and the Luenberger productivity indicator

Summary. Introducing a new difference-based Luenberger-Hicks-Moorsteen productivity indicator, this contribution establishes theoretically its relations with some existing ratio- and difference-based productivity indexes and indicators. The first main result is an approximation proposition stating that the logarithm of the Hicks-Moorsteen productivity index is about equal to the Luenberger-Hicks-Moorsteen productivity indicator. Secondly, we also establish the specific conditions under which the Luenberger-Hicks-Moorsteen indicator equals the recently introduced Luenberger indicator and compare these to the conditions governing the relations between ratio-based Hicks-Moorsteen and Malmquist indices.Received: 2 May 2002, Revised: 19 May 2003, JEL Classification Numbers: C43, D21, D24.We are grateful for the most constructive remarks of a referee. Obviously, the authors remain solely responsible for any residual shortcomings. Correspondence to: W. Briec     

The impact of product innovation on firm-level markup and productivity: evidence from China

This article empirically evaluates the impact of product innovation on firms’ markup and productivity. Based on a large sample of Chinese manufacturing firms, we estimate firm-level markup using the wedge between output elasticities of intermediate input and its cost share in total revenue. Firm productivity is measured as revenue productivity and adjusted with the estimated markup. The results suggest that product innovation increases firm-level markup and revenue productivity. However, the effect of product innovation on the adjusted productivity is mostly negative or insignificant. The observed relationships also vary in response to market structures. Our results indicate that the positive impact of product innovation on revenue productivity is mainly driven by price-cost markup changes rather than physical productivity improvements. Our study suggests the widely observed positive relationship between product innovation and revenue productivity should be interpreted with caution.     

Government interventions and productivity growth

This article investigates the impact of government industrial policy and trade protection of the manufacturing sector in Korea. Empirical results are provided, using four-period panel data for the years 1963 through 1983, for thirty-eight Korean industries in which trade protection reduced growth rates of labor productivity and total factor productivity, while industrial policies, such as tax incentives and subsidized credit, were not correlated with total factor productivity growth in the promoted sectors. The evidence thus implies that less government intervention in trade is linked to higher productivity growth.     

Electrification and energy productivity

Energy productivity is crucial for sustainable development. We use cointegration analyses to investigate the effect of electricity on energy productivity in Swedish industry from 1930 to 1990. Electricity augmented energy productivity in those industrial branches that used electricity for multiple purposes. This productivity effect goes beyond “book-keeping effects,” i. e. it is not only the result of electricity being produced in one sector (taking the energy transformation losses) and consumed in another (receiving the benefits).     

Schumpeterian and semi‐endogenous productivity growth explanations

This paper examines the nature and sources of productivity growth in South African manufacturing sectors, from an international comparative perspective. On panel data estimations, we find that the evidence tends to support Schumpeterian explanations of productivity growth for a panel of countries including both developed and developing countries, and a panel of South African manufacturing sectors. By contrast, semi‐endogenous productivity growth is supported for a panel of OECD (Organisation for Economic Cooperation and Development) manufacturing sectors. However, we also report evidence that suggests that sectors are not homogeneous. For this reason, time series evidence may be more reliable than panel data. Time series evidence for South Africa suggests that prospects for the sustained productivity growth associated with Schumpeterian innovation processes, is restricted to a narrow set of sectors. For the OECD manufacturing sectors, both semi‐endogenous and Schumpeterian growth finds support. Schumpeterian growth is present for a larger number of sectors than for South Africa, and is most prevalent in the North American economies.     

A note on productivity change in European cooperative banks: the Luenberger indicator approach

The Luenberger productivity indicator is employed to estimate and decompose productivity change in a sample of cooperative banks operating in 10 EU member states. An average annualised productivity growth of 2.59% is reported between 1996 and 2003, though there is heterogeneity in growth rates across countries. Generally speaking, productivity growth is driven by technological change. However, cooperative banks in southern European banking markets benefit as much from efficiency growth or catching‐up with industry best practice. The results suggest that technology sharing arrangements and greater competition arising from deregulation are positive contributors towards productivity change.     

Age dependency and labour productivity divergence

This study finds strong empirical evidence in favour of the hypothesis that the age composition of population matters for labour productivity growth. We applied the fixed effects panel model using data on a large number of countries over the period 1980–2010. Our results suggest that higher age dependency not only directly impacts negatively on labour productivity but also modifies the impact of other determinants of labour productivity. Child dependency has a more adverse effect on labour productivity than old age dependency. We specifically find that the marginal effects of gross capital formation, information and communication improvement, and labour market reforms are significant at lower levels of age dependency. However, the marginal effect of savings on labour productivity is high at a high level of age dependency. The impact of age dependency varies between developed and developing economies. Diversity in the size and nature of age dependency across regions and different income groups help to explain the labour productivity differential across them.     

Services liberalization and productivity of manufacturing firms

Employing a unique database of Ukrainian firms in 2001–07, we use the external push for liberalization in the services sector as a source of exogenous variation to identify the effect of services liberalization on total factor productivity (TFP) of manufacturing firms. The results indicate that a standard deviation increase in services liberalization within a firm is associated with a 9.2 percent increase in TFP. The effect is stronger for firms with high productivity, bringing about a reallocation of resources within an industry. Industry‐level results show that the effect of reallocation on industry productivity is almost as strong as the within‐firm effect. The dynamic interaction of services liberalization and TFP through the investment channel reinforces the effect. The effect is robust to different estimation methods and to different sub‐samples of the data. In particular, it is more pronounced for domestic and small firms.     

Information resources and economic productivity

This paper analyzes the role of information resources in the development of the United States economy and especially in the determination of productivity levels. The analysis is based on a formal economic model of the interrelationship between two sectors: an information sector, comprising all labor and capital used to process and handle information, and a production sector, which processes and handles material goods. The purposes of the model are to explain the past growth of the information sector workforce, to identify productivity trends in the sector, and to determine the implications of those trends for future economic performance. The analysis shows that, historically, the rate of efficiency improvement in information handling (essentially white-collar) work has been much slower than in production work. However this pattern is changing rapidly, chiefly as a result of the introduction of new data processing, communication and storage technologies. Our model shows that the expected future level of investment in these information technologies will be sufficient to reverse, by the mid 1980s, the slowdown of economic growth which is currently afflicting industrialized countries.     

Product market competition and productivity shocks

I investigate the interaction effects of competition and productivity shocks on stocks’ earnings and returns. I find that the sensitivities of earnings and returns to productivity shocks are negatively associated with competition intensity. I also find that the excess returns of productivity shocks-sorted portfolios are lower when competition intensity is high, even after controlling for known return predictors. Overall, the empirical evidence shows firms are less exposed to productivity shocks when competition is high. As such, this study provides a possible mechanism through which the structure of product markets affects stock returns.     

Circularity of the Malmquist productivity index

The geometric mean version of the Malmquist productivity index does not satisfy the circular test, and its component adjacent period indexes can give different productivity change measures for the same data. A fixed-base version of the index solves both problems, but it is not independent of the base period. It has been argued that time-neutrality of technical change is necessary and sufficient for all three properties to hold. We show that time-neutrality is sufficient, but not necessary, for all three properties. We develop a weaker version of time-neutrality that is necessary and sufficient for all three properties to hold. We thank a very perceptive referee for helpful comments, although content remains our responsibility. A longer working paper is available on request.     

The productivity trend in Iran Evidence from manufacturing firms

Iran has been experiencing slow growth for the past ten years. Using plant‐level information, we show that on average firm‐specific productivity in manufacturing sectors declined at the rate of 2.6% annually, while large top decile firms experienced a modest growth in productivity between 2005 and 2011. We decompose this trend and find that within‐plant variation is its main driving force while the between firms and industries component is insignificant. We test several alternative explanations that may contribute to these negative trends. We show that the subsidy reform had a negative effect, while privatization seems to have had no effect. Private management not affected productivity growth, while firm size is associated with higher productivity growth. Also, we find that productivity growth decreases with the energy intensity of the firm. We also find that R&D expenditures significantly increase productivity growth, while the R&D sales ratio is about 0.5% in manufacturing sectors, which is about one‐fifth of the world average. A one‐percent point increase in R&D expenditures increases productivity growth by 0.5%.     

Demand and innovation in productivity growth

The labour productivity impact of demand and innovation is investigated in this paper combining insights from the Kaldorian and Schumpeterian traditions. After a review of studies in such traditions, a general model is proposed for explaining productivity growth in European manufacturing and service industries in the late 1990s, followed by two distinct specifications for the industries oriented toward product innovation, and for those where process innovation dominates. The empirical analysis is based on the match of the SIEPI‐CIS2 database developed at the University of Urbino and Eurostat Input–Output Tables at the industry level, for 22 manufacturing sectors and 10 services sectors. Six European countries are considered: Germany, France, Italy, the Netherlands, Portugal and the United Kingdom. The results show that productivity growth in European industries can be explained by a combination of technology factors and demand dynamics, confirming the complementarity of technology and demand effects. On the demand side, household consumption emerges as the most pervasive component of demand, able to stimulate greater efficiency in all manufacturing and service industries. Investment also has a role, focused however on the capital goods producing industries. On the technology side, the mechanisms of productivity growth are fundamentally different in the industries oriented towards product innovation and in those dominated by process innovation. This evidence supports the view that innovation in firms and industries can be associated to two contrasting strategies, searching either for technological competitiveness, through knowledge generation, product innovation and expansion of new markets, or aiming at greater cost competitiveness, through job reductions, labour saving investment, flexibility and restructuring.     

Technology diffusion,spatial effects and productivity growth in the Chinese provinces

This paper investigates spatial spillover effects of productivity in China. We set up a model in which a Chinese province achieves productivity growth by taking advantage of productivity spillovers from the world frontier and from other Chinese provinces. By using fixed effects and GMM panel data methods, we show that productivity growth in an inland province in China can be partly attributed to productivity spillover effects of other provinces. We also show that provincial human capital plays an important role in determining the magnitude of these spillover effects.     

Innovation,competition and productivity

We investigate the drivers of firm‐level productivity in catching‐up economies by jointly estimating its relationship to innovation and competition using data from the EBRD‐WB Business Environment and Enterprise Performance Survey (BEEPS) in Eastern Europe and Central Asia. The findings confirm an inverted‐U shaped impact of competition on R&D. Both competition and innovation have a simultaneous positive effect on labour productivity in terms of either sales or value added per employee, as does a high share of university graduates and foreign ownership. Further positive impacts come from firm size, exports or population density. Innovation and foreign ownership appear to be the strongest drivers of multifactor productivity.     

Export,FDI and firm productivity

Many empirical papers tested the theoretical predictions of Helpman, Melitz and Yeaple (HMY, 2004) which sorts firms at different internationalization states according to their productivity levels. While these papers ignore the fact, that the theoretical predictions of HMY only apply to firms that become engaged in market-driven Foreign Direct Investment (FDI), we apply a more precise methodology using a French firm sample with more than 110?000 observations. Our results show that firms with a broader investment strategy, reflecting a great importance of market-driven motives, show higher productivity levels than firms with less encompassing foreign investment strategies. We conclude that the methodology is well-suited to sort firms according to the importance of market-driven FDI.     

An empirical test of marginal productivity theory

We explore an hitherto unused approach to testing marginal productivity theory. Our method rests on the simple idea that, under the assumption of a linear homogeneous production function, residual profits are informative about the discrepancies between factor payments and marginal products. Our empirical application using data on manufacturing plants in Chile suggest moderate deviations from marginal productivity theory which depend on firm size.     

Community banks,money and labour productivity

Does money affect productivity? We examine whether bank deposits, a measure of the money supply that excludes currency in circulation, influence labour productivity. Banks deposits are special in that they facilitate transactions and, in aggregate, add liquidity and credit availability to a region. By exploiting the distribution of community bank deposits across the states, we test the hypothesis that money is an input to the production function under a variety of panel data methods. We find evidence that bank transaction deposits and total deposits along with other production function inputs such as wages, labour and gross state product are cointegrated across the states; however, the economic contribution of money to labour productivity appears limited.     

产业集聚与地区间劳动生产率差异

Locally increasing returns is the source of industrial agglomeration, and it improves regional labour productivity and drives up regional inequality. Using data of 261 cities in 2004 in China, I find that the estimated elasticity of (average) labor productivity with respect to employment density is about 8.8%, compared with 5% in the USA and 4.5% in the EU. Further, I find that the difference of agglomeration effects among provinces exists two cases: insignificant difference and significant difference. However, under the polarization of industrial location, both two cases enlarge the inequality of labor productivity among provinces, and drive up the divergence of regional income. Translated from Jingji Yanjiu 经济研究 (Economic Research Journal), 2006, (11): 72–81