Public infrastructure as a determinant of productive performance in China

Public infrastructure investment is an essential part of China’s regional development policy. This raises the question to what degree public infrastructure capital matters for labor productivity in China, at the regional level as well as over time. This paper estimates cost function models of production in industrial enterprises, using province-level data from 1993 to 2003. The estimated rate of return in industrial production is 23–25%, and on average public infrastructure contributes 2–3% points to the growth in labor productivity among these enterprises.     

Distinguishing external from internal scale effects: The case of public infrastructure

The recent applied production theory literature focusing on the economic performance of firms has increasingly recognized the importance of scale effects on costs and therefore efficiency. These scale effects may include short run returns due to fixity of privately demanded inputs (i.e., capital, long run internal returns to scale, and external factors affecting costs. Since these different types of scale effects can be thought of as shifts in and movements along cost curves, the different cost effects of such factors can be identified in a framework which explicitly takes them into account in the definition ofscale.In this article we formalize such a framework, and then use it to measure short run, long run (internal) and external scale effects from fixity of private capital, nonconstant returns to scale and public infrastructure. We then use these measures to identify the impacts of these different scale factors on productivity growth. The focus on public infrastructure as an important external scale factor is motivated by the current theoretical and policy interest in this issue; we show how a structural production theory model provides a rich basis for the analysis of the cost effects of infrastructure investment.     

Estimating the benefits of effectively and proactively maintaining infrastructure with the innovative Smart Infrastructure sensor system

An innovative sensor system, designated ‘Smart Infrastructure,’ is being developed jointly by Cambridge University in the United Kingdom and Massachusetts Institute of Technology in the United States. This system provides real-time wireless information about the state of critical infrastructure. The Smart Infrastructure sensors are designed to monitor infrastructure, such as water pipelines, as well as to increase their capabilities for purposes of efficient maintenance. This paper presents a forecasting model that assesses the possible impacts of Smart Infrastructure technology currently being applied to the British water pipe market. In doing so, we identify key benefits of proactively managing infrastructure with such new technology. A probabilistic cost benefit analysis, which takes into account future uncertainty, is conducted using a Monte Carlo simulation. Our findings suggest that if the Smart Infrastructure sensor system is applied to water pipelines in the British market, there are likely to be significant economic benefits. They could be realised by avoiding disruption and damage costs (including water loss) due to water pipe bursts, as well as by reducing annual operating and maintenance costs. The mean cumulative net present value of savings derived from the case scenario for the period through year 2056 was estimated at US$ 23.7 billion.     

Social networks and labour productivity in Europe: an empirical investigation

This paper uses firm-level data recorded in the Amadeus database to investigate the distribution of labour productivity in different European countries. We find that the upper tail of the empirical productivity distributions follows a decaying power-law, whose exponent α is obtained by a semi-parametric estimation technique recently developed by Clementi et al. [Physica A 370(1):49–53, 2006]. The emergence of “fat tails” in productivity distribution has already been detected in Di Matteo et al. [Eur Phys J B 47(3):459–466, 2005] and explained by means of a model of social network. Here we show that this model is tested on a broader sample of countries having different patterns of social network structure. These different social attitudes, measured using a social capital indicator, reflect in the power-law exponent estimates, verifying in this way the existence of linkages among firms’ productivity performance and social network.     

Rates of return to public agricultural research in 48 US states

The internal rate of return to public investment in agricultural R&D is estimated for each of the continental US states. Theoretically, our contribution provides a way of obtaining the returns to a local public good using Rothbart’s concept of virtual prices. Empirically, a stochastic cost function that includes own knowledge capital stock as well as spillover capital stock variables is estimated. Stochastic spatial dependency among states generated by knowledge spillovers is used to define the ‘appropriate’ jurisdictions. We estimate an average own-state rate of 17% and a social rate of 29% that compare well to the 9 and 12% average returns of the S&P500 and NASDAQ composite indexes during the same period.     

The provision of public goods in a growing urban economy

The growth path of a mixed open urban economy is considered. In the private sector profit maximizing firms produce an all-purpose output with labor, capital and public infrastructure. Workers move between the urban area and the rest of the nation so as to increase their real income which is the sum of wages and income derived from the use of the urban infrastructure. The public sector determines infrastructure investments so as to maximize the current value of future per capita felicity. Infrastructure has public good characteristics and is used jointly by firms and workers. The urban growth path is derived and public sector policies are analyzed.     

Securing a Better Deal From Investors in Public Infrastructure Projects

Abstract

The return on capital is a major contributor to the cost of design, build, finance and operate (DBFO) contracts, under which public infrastructure is financed and delivered by private companies. The article presents a method for evaluating the rates of return targeted by bidders and applies this to 10 contracts commissioned by the UK National Health Service. The presence of significant excess returns is identified in each case. We argue that, if the rate of return projected by an investor exceeds a benchmark cost of capital, derived using standard capital budgeting techniques, then a reduction in the fee to be paid by the public authority is justified.     

Bridging the barriers: knowledge connections,productivity and capital accumulation

The paper contributes to the explanation of the large differences in cross-country productivity performance by modelling and testing the effects of social barriers to communication on productivity and capital accumulation. In an optimal growth model, social barriers to communication, which impede the formation of knowledge connections, are shown to reduce both transitory and steady-state levels of total factor productivity (TFP), per capita consumption and reproducible capital. Empirical testing yields a robust and theoretically consistent result: linguistic barriers to communication reduce productivity and capital accumulation. The findings provide an explanation for cross-country differences in TFP, and fresh insights into how productivity ‘catch up’ may be initiated.

Recent evidence on the impact of government budget deficits on the ex ante real interest rate yield on Moody’s Baa-rated corporate bonds

This study provides recent empirical evidence on the impact of the federal budget deficit on the ex ante real interest rate yield on Moody’s Baa-rated corporate bonds. The study is couched within an open loanable funds model that includes the ex ante real short term real interest rate, the M1 money supply, net international capital inflows, and the unemployment rate. Using quarterly data for the period 1973.1–2007.4, two-stage least squares estimation reveals that the federal budget deficit, expressed as a percent of GDP, exercised a positive and statistically significant impact on the ex ante real interest rate yield on these corporate issues.     

Sources of growth in Indonesian agriculture

Indonesia sustained an average increase in agricultural output of 3.6% per year between 1961 and 2006, resulting in a more than fivefold increase in real output. This paper constructs Tornqvist-Thiel indices of agricultural outputs, inputs and total factor productivity (TFP) to examine the sources of growth in Indonesian agriculture over this period. The paper extends previous work on measuring productivity change in Indonesian agriculture by assembling more complete data on cropland and expanding the commodity coverage to include cultured fisheries in addition to crops and livestock. It also accounts for the contribution of the spread of rural education and literacy to agricultural growth. Results show that Indonesia pursued both agricultural intensification to raise yield, especially for food crops, and extensification to expand crop area and absorb more labor. Productivity growth accelerated in the 1970s and 1980s but stagnated in the 1990s once “Green Revolution” food crop varieties had become widely adopted. TFP growth resumed in the early 2000s led by diversification into non-staple commodities such as tropical perennials, horticulture, livestock and aquaculture. Agricultural extensification continued to be an important source of growth in many of parts of the archipelago where previously forested areas were converted to cropland. Human capital deepening, in the form of the spread of literacy and education in the farm labor force, made a modest but sustained contribution to agricultural productivity growth.     

Auditor Independence and the Cost of Capital Before and After Sarbanes–Oxley: The Case of Newly Issued Public Debt

An important aim of the Sarbanes–Oxley Act (SOX) was to reduce the cost of capital by enhancing auditor independence. However, prior literature has argued that SOX has been ineffective in meeting this objective. We contribute to this debate by first providing evidence suggesting that auditor independence has increased following SOX. Though we posit an inverse relationship between auditor independence and cost of capital, it is an open question whether this relationship has become stronger or weaker following SOX. An examination of this relationship reveals that auditor independence is more strongly related to bond rating and bond yield premium in the post-SOX period relative to the period before SOX. This evidence suggests greater price sensitivity of corporate debt to the level of auditor independence following SOX. We also show that controlling for the effect of auditor independence and other factors, cost of debt decreased following SOX.     

Productivity impacts of infrastructure development in Asia

This study investigates the impact of infrastructure capital on total factor productivity in selected Asian countries. The scope of the assessment is broadened by exploring the effect of infrastructure development on sectoral differences in total factor productivity. The study calculated the total factor productivity over the period 2006–2016 for 16 manufacturing industries in 19 Asian countries. Further, the impact of lagged infrastructure and endowment is also explored with an eye toward improving different infrastructural measures. The empirical findings show that lagged infrastructure and endowment exert a positive and significant impact on infrastructural improvement. The impact of telecommunications, road, and power infrastructure on sectoral productivity is investigated by applying the fully modified ordinary least squares estimation technique to control the endogeneity problem associated with infrastructure provision. Overall, the empirical findings show that infrastructure provision, particularly the provision of telecommunications and power, is an important factor for explaining patterns of comparative advantage, whereas the provision of roads is important to explain patterns of absolute advantage. The results further indicate that road infrastructure is more important for low technology-intensive industries, while power infrastructure is crucial for high technology-intensive industries.     

Infrastructure Development and the Repositioning of Power in Three Mekong Region Capital Cities

Infrastructure — broadly defined to include road and rail networks, telecommunications, electricity and other utilities — offers both direct and indirect benefits to economic growth. The direct effects include employment and contracts for local firms, while its role as an enabling technology means that a multiplier effect is provided for the economy as a whole. Infrastructure also has a role to play in promoting the efficiency of governance and social cohesion. The relative importance of these factors varies according to the specific conditions applying within a geographical location. The Burmese capital, Naypyidaw, for example, has a symbolic status as the seat of postcolonial Burmese power, while also offering a strategic location from which to govern the country. The role of infrastructure in this case is to promote efficiency of rule and create a network in which the city can form a node connected with economically important locations. In Phnom Penh and Vientiane, by contrast, infrastructure is being used to both promote economic activities and link up with cross‐border markets. In all cases, albeit in different ways, capital cities are being repositioned within actual and emerging power networks in order to control and take advantage of processes of international capital accumulation.     

Productivity and efficiency in the US: effects of business cycles and public capital

We add to the literature on the US productivity slowdown and effects of public capital on productivity by employing Malmquist productivity indexes to measure productivity. These indexes allow us to decompose productivity growth into efficiency change and technological innovation. We derive these components for each observation, which we exploit to explore factors which may lead to differences in productivity across regions, including business cycles, both own-state and cross-border public infrastructure investment, and relative sizes of the manufacturing, service and public sector. Our results suggest that the components of total factor productivity change lend important insights into the fairly complex effects of public capital on productivity growth.     

Occupational Differences in the Determination of U.S. Workers'Earnings: Both the Human Capital and the Structured Labor Market Hypotheses Are Useful in Analysis

Abstract . Using the older men's panel of the National Longitudinal Surveys (n = 5,000), path analysis and occupationally stratified samples, an empirical examination is made of the relative role of the human capital hypothesis and the structured labor market hypothesis in the determination of earnings. Results suggest that both hypotheses are useful in achieving an understanding of the process. There is a primary labor market (jobs with high wages, job security and mobility on promotional ladders) with individual productivity differences largely consequent from human capital differentials (investments in education, training and experience). There is also a secondary labor market (jobs with low wages, high turnover poor working conditions) in which human capital investments are not rewarded, dominated by structural influences (e.g. unionization) that, rather than individual productivity differences, explain the process by which earnings are determined.     

MANAGEMENT STRATEGY AND NEW TECHNOLOGY IN RETAIL DISTRIBUTION: A COMPARATIVE CASE STUDY

This paper examines the establishment of two large dry food warehouses or distribution centres (DCs) each of which involved much technological innovation. We explore whether the introduction of the same technology into two similar DCs in one corporation leads to similar outcomes and to what extent such a technological change may influence organizational behaviour. We assess the managerial strategies and tactics associated with the technological change and the subsequent experiences at each site. In short, distribution centre A (DCA) was plagued by industrial disruption and had low productivity. By contrast, distribution centre B (DCB) had virtually no disruption and had high productivity. Following a change of corporate strategy, DCA was contracted out to a third party independent operator and became DCX. the new management immediately reduced the industrial disruption there and appeared to increase the productivity too; thus DCX was transformed in comparison with DGA. These contrasts are explained in terms of differing managerial strategies, patterns of industrial relations and work organization. We conclude that these three factors are crucial in determining the success of technological change and are more important determinants of organizational behaviour than is the particular type of technology.     

Analysis of regional productivity with capital as a quasi-fixed factor

Most existing studies of regional productivity growth do not incorporate the effect of variations in capacity utilization on changes in output. By failing to do so, their factor productivity estimates are biased. To overcome this shortcoming, we adjust multifactor productivity growth measure for changes in capacity utilization. Our technique recognizes that capital is a quasi-fixed factor which implies that capital in the short run can be either under- or over-utilized by a firm. Our results from 1974 to 1978 show that capacity adjusted multifactor productivity growth measure exceeds capacity unadjusted multifactor productivity growth measure for the nine census divisions. The bias in the capacity unadjusted measure of multifactor productivity growth is approximately 8 percent in East North Central and over 33 percent in Mountain. We find that the aggregate factor productivity growth is slowest in the traditional manufacturing belt (Middle Atlantic and East North Central divisions). The level of aggregate factor productivity in the manufacturing belt, however, is almost 33 percent higher than in regions in the south.     

Japanese management and salary productivity: the case of the electronic and automotive industries in Portugal

This paper intended to assert in what form the Japanese approach to business management, concerning the factors human resources, research and development (R&D) and organization and methods, has effect on the value creation by workers, beyond that expressed in direct salaries. The investigation fell on companies in the electronic and automotive sectors operating in Portugal, with and without Japanese capital, in the 6-year span from 2001 to 2006. This paper is divided into four parts. The first part presents the Workonomic Index as an indicator of salary productivity – the measure of the value creation by workers, beyond that expressed in direct salaries. The second part presents in short the factors that are linked to the high productivity of the Japanese industrial worker. The third part presents the goal, hypothesis and methodology of the empirical study, namely the components of the above-mentioned factors. Finally, the fourth part is dedicated to the presentation of the empirical study and its conclusions. The specific results demonstrated that the impact on salary productivity is clearly visible over the factor organization and methods. In addition, there is evidence of substantial indirect influence of R&D on the creation of surplus value.     

Explaining Inter-Provincial Inequality in Productivity Growth in Crop Production in Pakistan

Abstract

Data on crop production are assembled for four provinces—Punjab, Sindh, North-West Frontier Province and Balochistan—for the period from 1980/81 to 2005/06 to examine inter-provincial differences in productivity growth rates. Propositions are put forward and examined to explain the superior productivity performance of Punjabi crop producers over those in Sindh and North-West Frontier Province, and the unusual productivity trends in Balochistan. The major factors relate to economic infrastructure and human capital. The impact of agricultural research is difficult to discern, and further work is required to assess the lagged effects of research expenditures on TFP growth.

Explication des déséquilibres interprovinciaux dans l'augmentation de la productivité dans la production de cultures au Pakistan

RÉSUMÉ On a rassemblé des données pour les quatre provinces suivantes: Penjab, Sindh, Khyber-Pakhtunkhwa, et Baloutchistan, pour la période 1980/81 à 2005/06, afin d'examiner les différences interprovinciales dans les taux d'expansion de la productivité. On présente et on examine des hypothèses pour expliquer le rendement supérieur des producteurs du Penjab par rapport à ceux du Sindh et du Khyber-Pakhtunkhwa, ainsi que les tendances de productivité inhabituelles du Baloutchistan. Les principaux facteurs se rapportent à l'infrastructure économique et au capital humain. L'impact de la recherche sur l'agriculture est difficile à établir, et des travaux supplémentaires seront nécessaires pour évaluer les effets décalés des frais de recherche sur l'expansion du TFP.

Explicación de la desigualdad inter-provincial en el crecimiento de la productividad de la producción de cultivos en Pakistán

EXTRACTO Se recopilan datos sobre la producción de cultivos de cuatro provincias: Punjab, Sindh, Provincia de la Frontera Norte-Oeste y Balochistan, durante el período de 1980/81 a 2005/06, para examinar las diferencias inter-provinciales en los índices de crecimiento de la productividad. Se plantean y examinan propuestas para explicar el mayor rendimiento de la productividad de los productores de cultivos Punjabi con respecto a los de Sindh y la Provincia de la Frontera Norte-Oeste, y las inusuales tendencias de la productividad de Balochistan. Los factores principales se relacionan con la infraestructura económica y el capital humano. El impacto de la investigación agrícola es difícil de discernir, y se requiere más trabajo para evaluar los efectos retrasados de los gastos de investigación en el crecimiento TFP.      

Corporate R&D and firm efficiency: evidence from Europe’s top R&D investors

The main objective of this study is to investigate the impact of corporate research and development (R&D) activities on firm performance, measured by labour productivity. To this end, the stochastic frontier technique is used on a unique unbalanced longitudinal dataset comprising top European R&D investors over the period 2000–2005. In this framework, this study quantifies technical inefficiency of individual firms. From a policy perspective, the results of this study suggest that if the aim is to leverage firms’ productivity, the emphasis should be put on supporting corporate R&D in high-tech sectors and, to some extent, in medium-tech sectors. On the other hand, corporate R&D in the low-tech sector is found to have a minor effect in explaining productivity. Instead, encouraging investment in fixed assets appears important for the productivity of low-tech industries. Hence, the allocation of support for corporate R&D seems to be as important as its overall increase and an ‘erga omnes’ approach across all sectors appears inappropriate. However, with regard to technical efficiency, R&D intensity is found to be a pivotal factor in explaining firm efficiency and this turns out to be true for all industries.