Technology capital: the price of admission to the growth club

We assess long-run patterns of global agricultural productivity growth between 1970 and 2005 and examine the relationship between investments in technology capital and productivity. To measure agricultural total factor productivity (TFP) we employ a Solow-type growth accounting method to decompose output growth into input and TFP growth. For technology capital we construct two indexes reflecting national capacities in agricultural research and education-extension for 87 developing countries. We then correlate technology capital levels with long-term growth rates in agricultural TFP. Our findings show that global agricultural TFP growth as a whole accelerated since 1980, although performance was very uneven across developing countries. TFP growth rates were significantly influenced by technology capital. Marginal improvements to research capacity, given a minimal level of extension and schooling existed, were associated with faster TFP growth. However, marginal increases in extension-schooling without commensurate improvements in research capacity did not improve productivity performance.     

Estimating the returns to education for Australian youth via rank-order instrumental variables

This paper employs the rank-order instrumental variable (IV) procedure of Vella and Verbeek [Vella, F., Verbeek, M., 1997. Using rank order as an instrumental variable: an application to the return to schooling, CES Discussion Paper 97.10, K.U. Leuven.] to estimate the returns to education for Australian youth. The attraction of this approach is that it can account for the endogeneity of schooling in the wage equation via the use of instrumental variables without the use of exclusion restrictions. We find, after accounting for the endogeneity of schooling, that an additional year of schooling is associated with an increase in wages of approximately 8%. Furthermore, we find that the rank-order IV approach is able to identify the presence of endogeneity in this particular empirical example. However, despite this, the adjusted estimate of how schooling affects wage is close to the ordinary least squares (OLS) estimate.     

Educational mismatch,wages, and wage growth: Overeducation in Sweden, 1974–2000

We examine the impact of educational mismatch on wages and wage growth in Sweden. The empirical analyses, based on cross-sectional and panel data from the Level of living surveys 1974–2000, are guided by two main hypotheses: (a) that educational mismatch reflects human capital compensation rather than real mismatch, and (b) that educational mismatch is real but dissolves with time spent in the labour market, so that its impact on wages tends toward zero over a typical worker's career. Our findings do not support these hypotheses. First, significant differences in contemporaneous economic returns to education across match categories remain even after variations in ability are taken into account. Second, we find no evidence that the rate of wage growth is higher among overeducated workers than others. Our conclusion is that the overeducated are penalized early on by an inferior rate of return to schooling from which they do not recover.     

The role of fixed capital depreciations for TFP growth: evidence from firm level panel data estimates

The role of accounting depreciation rates and the stocks of fixed capital has been well established in the literature. By exploring available evidence on the value of fixed assets in certain countries, this paper makes use of firm level data on fixed capital depreciations over the period 1990–2008 from a group of OECD countries along with panel data estimations to investigate their role for total factor productivity (TFP) as it is defined through growth accounting, since different capital depreciation profiles imply different rates of capital accumulation and, therefore, different estimates of TFP. The empirical results indicate a positive relationship between the two variables under study.     

Measuring labor cost for productivity comparison

This paper presents measures of labor cost applicable when the wage and marginal product are not equal by period. The user cost of labor, an alternative to the wage, is the price of hiring the services of the worker per unit time. This user cost is dependent on the sequence of wages earned by a worker over a career, interest rates, and career length or eventual tenure. For the United States, 1963–1978, labor compensation shares based on the wage exceed those for the user cost. After 1978, the reverse obtains. The contribution of labor, and measured productivity performance is sensitive to the price of labor services.This paper was processed by M. Brown.     

Productivity,Technology and Economic Growth: What is the Relationship?

The relationship between productivity, technology and economic growth has been debated extensively in the endogenous growth, growth accounting, New Economy and policy literature. This paper briefly surveys the literature on total factor productivity (TFP) calculations – the various techniques and problems associated with it. We argue that TFP is not a measure of technological change and only under ideal conditions does it measure the supernormal profits associated with technological change. The critical driving force of economic growth is not the super normal profits that technological change generates but rather the continuous creation of opportunities for further technological development. Six illustrations of when TFP fails to correctly measure these super normal profits are provided. A version Carlaw and Lipsey's (2003b) model of endogenous general purpose technology‐ driven growth is then utilized to make some progress toward answering Prescott's (1998) call for a theory of TFP. The model is used to simulate artificial data and connect theoretical assumptions of returns to scale and resource costs to the conditions under which TFP miss‐measures the actual growth of technological knowledge.     

Environmental externalities and regulation constrained cost productivity growth in the US electric utility industry

This paper examines whether having to comply with Phase 1 of Title IV of the 1990 Clean Air Act, and rate of return regulation, each impacted the rate of total factor productivity (TFP) growth when accounting for the production of good and bad outputs. Phase 1, effective from 1995 to 1999, requires electric utilities to reduce their emissions of sulfur dioxide and nitrogen oxide (bad outputs). Actions undertaken to reduce the emissions (using less sulfur content coal, installing equipment), may have led to higher production costs, and impacted the rate of TFP growth. Rate regulation may impact how the firm produces its selected output level, which could lead to higher cost over time, and biased estimates of TFP growth. Following the work of Ball et al. (Struct Change Econ Dyn 16(3): 374–394, 2005), who developed the standard Malmquist cost productivity (MCP) index, we develop a MCP index for a rate regulated firm (RMCP index) then use the standard and regulated indices to determine whether having to comply with Phase 1 impacted TFP growth. Empirical results indicate that (i) the RMCP index underestimated the rate at which TFP growth occurred, (ii) Phase 1 utilities on average experienced positive TFP growth from 1996 to 2000 (Phase 1 firms experienced higher TFP growth rates than the rates experienced by firms not subject to Phase 1), and operated more allocatively inefficient in complying with the Phase 1 restrictions. Complying with Phase 1 did not affect the rate at which technical change occurred or the rates of change in scale efficiency.     

The dynamics of efficiency and productivity growth in U.S. electric utilities

This study recognizes explicitly the efficiency gain or loss as a source in explaining the growth. A theoretically consistent method to estimate the decomposition of dynamic total factor productivity growth (TFP) in the presence of inefficiency is developed which is constructed from an extension of the dynamic TFP growth, adjusted for deviations from the long-run equilibrium within an adjustment-cost framework. The empirical case study is to U.S. electric utilities, which provides a measure to evaluate how different electric utilities participate in the deregulation of electricity generation. TFP grew by 2.26% per annum with growth attributed to the combined scale effects of 0.34%, the combined efficiency effects of 0.69%, and the technical change effect of 1.22%. The dynamic TFP grew by 1.66% per annum for electric utilities located within states with the deregulation plan and 3.30% per annum for those located outside. Electric utilities located within states with the deregulation plan increased the outputs by improving technical and input allocative efficiencies more than those located outside of states with deregulation plans.

Errors of measurement and the recent acceleration in manufacturing productivity growth

Using detailed (4-digit SIC) industry data for the years 1958–1989, I examine whether the recent acceleration in manufacturing productivity can be attributed to the effects of mismeasurement of the prices of inputs and output, by testing a model linking a set of proxy variables for measurement error to a series of measures of acceleration in total factor productivity (TFP). Alternative TFP estimates are presented in order to determine if the findings are sensitive to the method of TFP calculation. The results are inconsistent with the measurement error hypothesis and invariant to the specification of the TFP equation.     

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.     

Decomposing TFP growth in the presence of cost inefficiency,nonconstant returns to scale,and technological progress

A thorough understanding of changes in productivity measures is important to economists and policymakers, because productivity growth is a major source of economic growth. This article explores the relationship between changes in total factor productivity (TFP) growth, defined using an index number approach, and changes in returns to scale, cost efficiency, and technology. Several decompositions are developed, using alternatively production and cost frontiers. The last decomposition developed also allows for multiple outputs.The refereeing process of this paper was handled through W.H. Greene.     

Productivity accounting for separable technologies

This paper develops a method for decomposing total factor productivity growth in separable production technologies and uses it to examine the role of pest-damage prevention on agricultural productivity. The rate of technical change is decomposed into output-enhancing and damage-preventing components. Growth accounting cannot provide separate estimates of these two components of technical change, and instead a parametric model is developed based on the dual cost function. The proposed model captures both components of technical change, properly accounts for environmental effects, and also accommodates the presence of capacity utilization and scale biases. The empirical application of the model is to a sample of Cretan olive-oil producers, and the results show that output-enhancing technical change is more important than damage-preventing technical change in explaining observed total factor productivity (TFP) changes. The second largest source of TFP growth is due to the scale effect.     

Over-education for the rich,under-education for the poor: A search-theoretic microfoundation

This paper studies the efficiency of educational choices in a two sector/two schooling level matching model of the labor market where a continuum of heterogenous workers allocates itself between sectors depending on their decision to invest in education. Individuals differ in working ability and schooling cost, the search market is segmented by education, and there is free entry of new firms in each sector. Self-selection in education causes composition effects in the distribution of skills across sectors. This in turn modifies the intensity of job creation, implying the private and social returns to schooling always differ. Provided that ability and schooling cost are not too positively correlated, agents with large schooling costs — the ‘poor’ — underinvest in education, while there is overinvestment among the low schooling cost individuals — the ‘rich’. We also show that education should be more taxed than subsidized when the Hosios condition holds.     

The productivity effects of the liberalization of Japanese telecommunication policy

In the early 1980s, the Japanese government decided to pursue policies of liberalization that opened Japan's telecommunication market to competition and moved toward the privatization of Nippon Telegraph and Telephone (NTT), the dominant domestic telecommunication service provider. The purpose of this paper is to assess the effects of liberalization on the productive performance of NTT. To assess the productive consequences of liberalization, we first provide basic productivity measures for NTT. The Total Factor Productivity (TFP) measures are then decomposed to separate out the effects of liberalization from other factors such as scale, technology, and capacity utilization. The TFP decomposition is based on the parameter estimates of a dynamic cost model.During the 1958–87 period, NTT's TFP level increased at an average annual rate of 3.4%. However, TFP improved at a significantly faster rate following the decision to adopt policies of liberalization. The NTT's average annual TFP growth rate was 5.12% for the 1982–87 period as compared to a 0.26% per year growth rate for the previous five year (1977–82) period. The decomposition of TFP growth appears to indicate that liberalization was a major source of productivity improvement for NTT.     

Blame the baby boomers for depressed wage growth

• ? While ‘blame’ may sound harsh, the reality is that in an ageing society, the over‐60s accounting for a bigger share of the workforce equals lower wage growth. This is particularly pertinent for the eurozone right now with the baby boomer generation entering the last phase of their working life. Our analysis shows that the very sizeable over‐60 cohort is depressing aggregate wage growth by up to 0.3 ppts annually. That may also help explain why inflation is still subdued .
• ? European policy makers are scratching their heads about why wage growth has not picked up in line with economic growth over the past two years. For the ECB this is relevant as it tries to understand why inflation remains low. While much of the debate centres around unemployment and the Phillips curve, this article looks at the impact of an ageing society on wage growth.
• ? Even though this is more of a structural, rather than a cyclical, perspective, it is particularly important for the eurozone economies right now, because the large post‐World War II baby boomer generation is strongly pushing up the elderly share of employment (measured as those aged 60 and above). As the share of the over 60s in total employment grows, so does their weight in aggregate wage growth.
• ? The crucial point is that wages increase with age, but at a decreasing rate, and stay essentially flat above 55. The main reasons are that the elderly invest much less in continued education and are less inclined to switch to better‐paying jobs.
• ? Our analysis shows how substantial the negative impact of an ageing workforce is on wage growth in the eurozone. By simulating an alternative demographic scenario, we estimate that wage growth in 2015–17 would have been 0.3 ppts per year higher had it not been for the ageing baby‐boomers. Similarly, forecasts for 2018–20 not accounting for the baby‐boomers may overstate wage growth by some 0.2 ppts or more annually.

     

Are Returns to Schooling Concentrated Among the Most Able? A Semiparametric Analysis of the Ability–earnings Relationships1

In this paper I explore the relationship between ability and log waves using flexible estimation techniques. I find evidence of nonlinearities in these relationships that vary across levels of schooling, and argue that ability‐sorting into higher education creates problems for accurately identifying the return to schooling over the entire ability support. Over an ability support that is “common” to those with and without a college education, I find that the college log wage premium is incerasing for the more able, and this premium grew during the period 1984–1994 for individuals at all points in the ability distribution. The growth of this wage premium over time also appears to have followed a “smoother” linear path for high‐ability individuals than individuals of lower ability.     

How efficiently do U.S. cities manage roadway congestion?

We estimate efficiency and TFP growth for two measures of congestion and two measures of the monetary value of congestion for the largest 88 contiguous cities in the U.S. over the period 1982–2007. Using stochastic frontier analysis we find that the efficiency scores for congestion and the associated ranking of cities is sensitive to the measure of congestion. In contrast, the efficiency scores and rankings are robust for the two measures of the monetary value of congestion. Most importantly, for the most valid measure of congestion and both measures of the monetary value of congestion, we find that average TFP growth over the study period is characterized by an upward trend. This is an encouraging sign even though in all three cases growth is only zero or slightly less than zero at the end of the study period. We therefore conclude that policies which have been used towards the end of the study period such as providing incentives to carpool and encouraging employers to offer flexi-time and telecommuting arrangements appear to have been effective and should be implemented more widely.     

The effects of families and ability on men's education and earnings in Britain

The paper estimates the returns to education for a cohort of men born in Britain in March 1958 who have been followed since birth until the age of 33. The data used has a wealth of information on family background including parental education, social class and interest shown in the child's education as well as measures of ability. These variables are typically missing in studies looking at the returns to schooling. In the paper, we find that the average return to an additional year of full-time education for the UK men is somewhere around 5 1/2% to 6% even after correcting for the effects of measurement error. The paper also presents evidence that the returns to an additional year of schooling in the UK are heterogeneous. In particular, the paper finds some evidence that men with lower tastes for education, have significantly higher marginal returns to education. The results of the paper suggest that recent IV estimates of the returns to schooling in the UK, which exceed typical OLS estimates, may overestimate the average marginal return for the population of men as a whole.     

The Risk-Relevance of Accounting Data: Evidence from the Spanish Stock Market

This paper analyses the relevance of accounting fundamentals to inform about equity risk as measured by the cost of equity capital. Assuming the latter is a summary measure of how investors make decisions regarding the allocation of resources, the strength of the association between the cost of capital and the accounting‐based measures of risk indicates how important these measures are for market participants when making economic decisions. To infer the cost of equity capital, we use the O'Hanlon and Steele's method, which is based on the residual income valuation model. Moreover, we use the insights from this model to provide a theoretical underpinning for the choice of the accounting variables related to risk. The sample refers to the non‐financial firms listed in the Madrid Stock Exchange along the period 1987–2002. Our results support our initial expectations regarding the association between the cost of equity capital and the accounting‐based risk variables, thereby supporting the usefulness of fundamental analysis to determine the risk inherent in share's future payoffs. In particular, we highlight the role of investing risk, which has been ignored in previous research. Our results are also robust to measures of risk other than the cost of capital such as the variability in total returns and the firm's systematic risk (β).     

Double serial correlation for multilevel growth curve models

Multilevel growth curve models for repeated measures data have become increasingly popular and stand as a flexible tool for investigating longitudinal change in students’ outcome variables. In addition, these models allow the estimation of school effects on students’ outcomes though making strong assumptions about the serial independence of level-1 residuals. This paper introduces a method which takes into account the serial correlation of level-1 residuals and also introduces such serial correlation at level-2 in a complex double serial correlation (DSC) multilevel growth curve model. The results of this study from both real and simulated data show a great improvement in school effects estimates compared to those that have previously been found using multilevel growth curve models without correcting for DSC for both the students’ status and growth criteria.