The distributional effects of selection and capital accumulation on firm productivity under imperfect capital markets

In this evolutionary model, random shocks create differences in the rate of return on capital, while individual saving and investment behavior can reduce these differences over time. Firms with either low total factor productivity (TFP) or a low average return on capital are selected for exit, and new firms enter to take their place. As would be expected, a higher turnover rate improves TFP and reduces its variation. While we show that a higher turnover rate would result in a more positively skewed TFP distribution if exit selection is based directly upon TFP, we find that when we select firms for exit based on their average product of capital, the marginal impact of a higher turnover rate is to more negatively skew the TFP distribution. Overall, our simulations highlight the importance of considering the role selection may play in shaping the distribution of productivity when econometricians seek estimates of firm inefficiency.

Vintage capital,market structure and productivity in an evolutionary model of industry growth

This paper examines the effects of inter-firm variation in vintage equipment replacement policies on industry productivity and structure using an evolutionary model based on Nelson-Winter. Traditional industry productivity measures assume a graduated replacement policy with low variation across firms in the average age of the capital stock. This approach allows for inter-firm policy variation. The first part reviews the neoclassical treatment of vintage capital investment; the second part outlines an evolutionary model of vintage replacement in the context of industry growth; and the third part presents results of simulation experiments focused on the relationship between vintage replacement patterns and industry productivity growth. Findings suggest that inter-firm differences in vintage capital investment policies may account for significant shifts in the rates of industry productivity growth and changes in market structure.     

Informality,innovation, and aggregate productivity growth

This paper investigates how the costs of innovation in the formal sector temper or magnify the impacts of traditional policy levers such as taxation on sectoral choice. I embed a decision whether to operate formally or informally into a richer, general equilibrium model. Formal firms are subject to taxation, but they can improve their productivity through process innovation. Informal firms can potentially avoid taxation, and their productivity is determined by productivity growth in the formal sector. I find that changing tax rates from 50% to 60% decreases formal‐sector participation by 20.9%; however, this percentage falls by 10% when the cost of innovation is lower in the formal sector. The model also illustrates how changes in tax policy affect total factor productivity growth by limiting both the number of formal‐sector firms and the intensity of innovation. These results indicate a potential mechanism to induce firms to operate formally or mitigate harmful impacts of necessary tax changes.     

Generation and distribution of the total factor productivity gains in US industries

This study estimates productivity gains and their distribution among inputs and outputs for 63 American industries over the period 1987–2012. Using the traditional surplus accounting method, the Total Factor Productivity (TFP) growth rates are divided into their price change components in order to determine the stakeholders who do or do not receive price advantages.

An initial analysis showed that TFP of US industries increased at an average trend of 0.8% and established that remunerations to employees and firms’ profitability constituted 49% and 39%, respectively, of the accumulated economic surplus from the productivity gains. Suppliers of intermediate inputs retained 12.1% of the surplus. Finally, customers, equipment and structure providers were the losers in the distribution of economic surplus via, respectively, a significant growth of relative final demand prices and a substantial price decrease of these assets.

A second step analysis underlined that industries with high TFP growth rates mainly benefited customers and firms via output price decreases and profitability improvements while industries with low or negative TFP changes hurt customers through significant output price increases. The sectoral level analysis also showed that employees’ remunerations depend only slightly on productivity gains produced within their industrial sectors.     

试论一般生产力到服务生产力的演进与测量

从一般生产力到服务生产力概念的演进是适应现实需要的产物，有其客观必然性；对生产力及服务生产力概念有一个较为清晰的界定，是服务生产力研究的前提；服务生产力的概念及其测量应综合考虑效率、效益、企业投入的资源以及顾客投入的资源等要素，其虽然从内涵等方面有别于传统生产力的概念，但也并未脱离基本的投入产出模式。     

Knowledge spillovers,human capital and productivity

Knowledge spillovers in the form of human capital are often regarded as the engine of sustained growth and development. We employ a rich employer–employee matched dataset on the manufacturing industry in Taiwan, a newly industrialized economy, to quantify the significance of human capital spillovers and their effects on productivity gains. Using the ratio of higher-educated (university or above) employees in each city as the external human capital index of a plant (excluding the reference plant itself) and addressing the potential endogeneity of various unobservable factors attributable to the location of the plant, we find that within a given city, a 1 percent increase in the proportion of higher-educated employees will increase the productivity of plants in that city by approximately 0.93–1.15 percent. Furthermore, the productivity increases are found to be greater for high-tech plants and for those located in cities with science parks. This indicates that human capital spillovers are not only present, but stronger under greater technology intensities. Our measure of the monetary value of such spillover effects indicates that a 1 percent increase in the percentage of higher-educated employees in a city will raise the value-added per plant by US$15,937, or, equivalently, an increase of US$1.27 billion for the entire manufacturing industry.     

Entry,exit and productivity growth: Spanish manufacturing during the eighties

This paper analyses the role played by both competitive pressure (increasing imports) and the restructuring of industries through entry and exit in productivity growth of Spanish manufacturing during the eighties, the key period of its accession to the EEC economy. A GMM panel estimation of the determinants of corrected Solow residual for 75 manufacturing during 1979-1990, shows that these forces accounted for 80% of productivity growth, playing an important role the displacement of inefficient firms by competitive entry.JEL Classification: D24, C33We are grateful to S. Bentolila, F. Bourguignon, T. Coelli, J. Dolado, A. de la Fuente, J. García, L. Rodríguez, J. Segura, X. Vives and an anonymous referee for useful comments on previous versions of this paper. All remaining errors are our own.     

Payment uncertainty, the division of labor, and productivity declines in great depressions

This paper proposes a simple model that formalizes a variant of Ohanian's conjecture explaining the productivity declines observed in the Great Depression [Ohanian, L.E., 2001. Why did productivity fall so much during the Great Depression? American Economic Review 91 (2), 34–38]. If a large payment shock like an asset-price collapse renders many firms insolvent, other economic agents become exposed to a higher risk of not being paid (payment uncertainty). The payment uncertainty causes endogenous disruptions of the division of labor among firms, thereby lowering macroeconomic productivity.The prediction of the model is that productivity correlates negatively with bankruptcies and positively with the cost share of intermediate inputs, which is consistent with the data from depression episodes. The model implies that the so-called failure of macroeconomic policy in the United States during the early 1930s, when a rash of bankruptcies occurred, could actually have been welfare enhancing, since the quick exit of insolvent agents can resolve payment uncertainty quickly.     

Lagging productivity growth: Measurement,technology, and shock effects

One of the most important problems about which economists have professional knowledge is lagging productivity growth. After illustrating some significant developments this paper addresses three questions: (1) To what extent does R&;D activity drive productivity growth, (2) how do alternative measures of productivity affect the conclusions and (3) how did the oil price shocks and the increased openness of the U.S. economy affect productivity growth? After removing the influence of the extremely dynamic computer industry, average manufacturing industry productivity in the U.S. throughout the 80s grew at a disappointing pace. And it didn't improve in the most dynamic industries. But there is good news as well. First, part of the 1970s productivity slump is clearly attributable to the 1973–74 oil price shock. Second and more important, technological innovation does not appear to have lost its power in driving productivity growth forward. Indeed there is evidence of stronger and more consistent productivity effects from R&;D investment during the 1980s, although the exact channels through which R&;D enhances manufacturing sector productivity are left in doubt. Estimates of the role inter-industry technology flows play are sensitive to aggregation and the conventions used to construct the industry price deflators underlying productivity measures.     

Appropriability mechanisms,innovation, and productivity: evidence from the UK

ABSTRACT

We use an extended version of the well-established Crepon, Duguet, and Mairesse model [1998. “Research, Innovation and Productivity: An Econometric Analysis at the Firm Level.” Economics of Innovation and New Technology 7 (2): 115–158] to model the relationship between appropriability mechanisms, innovation, and firm-level productivity. We enrich this model in three ways: (1) We compare estimates obtained using a broader definition of innovation spending to those that use R&D spending. (2) We assume that a firm simultaneously innovates and chooses among different appropriability methods to protect the innovation. (3) We estimate the impact of innovation output on firm productivity conditional on the choice of appropriability mechanism. We find that firms that innovate and rate formal methods for the protection of intellectual property highly are more productive than other firms, but that the same does not hold in the case of informal methods of protection, except possibly for large firms as opposed to SMEs. We also find that this result is strongest for firms in the services, trade, and utility sectors, and negative in the manufacturing sector.     

Technology, demand and distribution: a cumulative growth model with an application to the Dutch productivity growth slowdown

This paper argues that the case for real wage growth restraint,and the consequent restoration of profitability, which the mainstreamconsensus regards as a necessary condition for sustained outputand productivity growth, is based on weak foundations, becauseit neglects the negative impact of wage moderation on productivitygrowth. Using a general Keynesian growth model, which integratesa (wage-led or profit-led) demand regime and a productivityregime (incorporating the productivity-growth enhancing effectsof higher demand and higher real wages), the conditions areidentified under which real wage restraint fails to raise outputand productivity growth. The model is applied empirically tothe Netherlands (1960–2000).     

Long-term population, productivity, and energy use trends in the sequence of leading capitalist nations

There are many theories on why sustainable science, technology, and commerce emerged first in Western Europe rather than elsewhere. A general theory is that the geography of Europe facilitated the development of diverse and independent states and resultant competition among them. Over the past 500 years, the sequence of leading states began with Portugal and the Netherlands on the edge of continental Western Europe, then moved to the British Isles, and finally moved across the Atlantic Ocean to the United States. The transitions of leadership from one state to another occurred about every 100 years. This sequence suggests that leadership moves from smaller states to larger states (although not to the largest existing state at the time), perhaps because larger states have the flexibility to develop more complex organizational processes and adapt new technology. To explore this theory further, this paper analyzes state population data at the beginning and end of each leadership period. The data reveal an accelerating initial population sequence. Further understanding is gained from comparing the populations of the preceding and succeeding states at the time of each transition: the succeeding state's population is usually about two times larger than that of the preceding state.It is also seen that over time, the new organizational processes and technologies developed by the leading state are diffused and adapted by other states. Evidence of the effects of this diffusion should be seen in the dynamics of relative productivity and energy use (since the relative advantage of new ideas and technology can be maintained for a short period of about 100 years). This paper investigates these trends in population, trade, and resources to provide insight on possible future transitions.     

Link between innovation and productivity in Canadian manufacturing industries

Empirical studies commonly use research and development (R&D) to measure innovation and often find, especially in Canada, no strong link between productivity and innovation. In this article, we model innovation as an unobservable latent variable that underlies four indicators: R&D, patents, technology adoption, and skills. We find that these indicators are reasonably good measures of innovation for aggregate manufacturing. However, except for skills, the reliability of the indicators for innovation differs among individual industries. Our innovation indexes, based on the latent variable model, show that most manufacturing industries became more innovative over the 1980–1997 period. The pace of innovation in the electrical and electronic products industry accelerated during the 1990s. In addition, we show that the new measure of innovation has a positive and statistically significant impact on productivity. It takes from 1 to 3 years, depending on the industry, for innovation to generate an impact on productivity.     

Micro-heterogeneity and aggregate productivity development in the German manufacturing sector

A decomposition of aggregate productivity growth of German manufacturing firms that pertain to 11 different industries at a roughly two-digit level observed over the period 1981–1998 is performed. Productivity is measured by a nonparametric frontier function approach. The decompositions of productivity allow for an explanation of the aggregate outcomes by the quantification of the effect of structural change and the contributions of entering and exiting firms. Our results show that these forces drive aggregate productivity to a considerable extent. Remarkably, the large productivity improvements after the German reunification are mainly driven by structural change.

Trade and productivity: an industry perspective

We use a sample of 14 OECD countries and 15 manufacturing industries to test for the effect of trade on productivity. Endogeneity concerns are accounted for using the geographical component of trade as instrument as suggested by Frankel and Romer (Am Econ Rev 89(3):279–399, 1999). We find that trade, measured in terms of the export ratio, increases productivity, even if country-fixed effects such as the quality of institutions are controlled for, though results are less robust for imports. Estimates at the aggregate manufacturing level turn out much larger, emphasizing the role of inter-industry spillovers.

Human capital,infrastructure, and the productivity of Indian rice farmers

Along with investments in agricultural research, extension, and education, limited investment in transportation and communication infrastructure is often identified as an important constraint on the diffusion and use of new agricultural technology. Yet there are few systematic studies of the relationship between agricultural infrastructure and agricultural productivity, and there do not appear to be any studies which model and measure the productivity effect of infrastructure at the farm level. The aim of this paper is to fill this theoretical and empirical hiatus by investigating how human capital and infrastructure constrain the choice of technology and hence productivity. The effects of these capital constraints are translated into a ‘variable coefficient’ production function to measure their productivity effects on Indian rice farmers. The findings indicate that productivity is a function of the farmer's schooling, extension programs, transportation and communication infrastructure, irrigation availability, the utilization of high yielding varieties, and climatic factors. These findings thus support the hypothesis that agricultural productivity is a function of transportation and communication infrastructure, and suggest that infrastructure development is important to both growth and equity concerns in policy planning.     

A two-sector Kaleckian model of growth and distribution with endogenous productivity dynamics

This study extends a two-sector Kaleckian model of output growth and income distribution by incorporating endogenous labour productivity growth. The model is composed of investment goods and consumption goods production sectors. The impact of a change in wage and profit shares on capacity utilisation and output growth rates at the sectoral and aggregate levels are identified. The study reveals short-run cyclical capacity utilisation rates and productivity growth dynamics. Even if the short-run steady state is stable, the capital accumulation rate in the consumption goods sector must decrease more than that in the investment sector for long-run stability. When simultaneous rises in profit shares in both the sectors affect long-run aggregate economic growth differently at a steady state, the distributional interests between the same class in different sectors may hamper the long-run economic growth. A policy message is that the effect of income distribution on industrial output growth is not always beneficial. These phenomena are specific to two-sector models and cannot be observed when using conventional aggregate growth models.     

Exact nonradial input, output, and productivity measurement

Summary. The use of measures originally suggested by Bennet, Bowley, and Hicks in the context of cost of living, welfare, and consumer surplus measurement to measure inputs, outputs, and productivity is examined. Suitably normalized versions of the Bennet-Bowley measures are shown to be exact and superlative measures of input, output, and productivity indicators. Received: April 2, 2001; revised version: August 8, 2001     

Computerization,workplace organization,skilled labour and firm productivity: Evidence for the Swiss business sector

The present study explores empirically the hypothesis that information and communication technologies, new organizational practices and human capital are important determinants of firm efficiency and performance, further that the combined use of these three factors leads to a mutual strengthening of their impact on firm performance. The analytical framework is that of a production function at firm level. The new contribution of this study to the empirical literature is that it is the first empirical study of this type for the Swiss business sector, using a rich data set at firm level for the year 1999 which were collected by means of a postal survey, and giving particular attention to the complementarity issue (several approaches) and to the endogenization of the technology and organization variables.     

Technology transfers,foreign investment and productivity spillovers

This paper explores the relationship between foreign direct investment (FDI) and the productivity of host country domestic firms. We rely on a specially designed survey of over 4000 manufacturing firms in Vietnam, and separate out productivity gains along the supply chain (obtained through direct transfers of knowledge/technology between linked firms) from productivity effects through indirect FDI spillovers. In addition to identifying indirect vertical productivity spillovers from FDI, our results show that there are productivity gains associated with direct linkages between foreign-owned and domestic firms along the supply chain not captured by commonly used measures of spillovers. This includes evidence of productivity gains through forward linkages for domestic firms which receive inputs from foreign-owned firms.