NAIRU and productivity shocks: evidence from three gigantic economies

This article investigates NAIRU which stands for Non Accelerating Inflation Rate of Unemployment and its trend in three of the world gigantic economies to mention orderly USA, Japan and China. A Vector Autoregressive Regression model estimated to study the reaction of NAIRU to shocks imposed by labour productivity. Results indicate both productivity shocks and NAIRU fluctuations have counter effects.     

Innovation and productivity in family firms: evidence from a sample of European firms

ABSTRACT

Using firm-level data, we estimate the returns to R&D investments for a sample of European manufacturing firms over the period 2007–2009. Results confirm that R&D efforts are positively related to productivity regardless of firm type (family or nonfamily firms). Additionally, we find that family firms invested more in R&D than nonfamily firms, but the returns to their R&D investments are low, emphasizing that they have a lower capacity to translate R&D investments into economic gains.     

Firm innovation and productivity in Europe: evidence from innovation-driven and transition-driven economies

This article examines the links between firm innovation and firm productivity performance across a range of European economies, and in particular, we explore the differences between countries which are in transition from efficiency-driven to innovation-driven with those which are primarily innovation-driven economies. We employ an endogenous-switching technique to explore micro-economic survey-based data from both innovating and noninnovating firms. The model allows us to construct counterfactual scenarios which overcome problems of self-selection in the data. Some of the findings provide support for the traditional patterns previously found in the innovation literature, in which innovation efforts and investments in physical and human capital are found to be important for product and process innovations in manufacturing and service firms and across economy types. Our counterfactual analysis also allows us to outline a rationale for policy intervention towards noninnovating firms as well as innovating firms depending on where the transitional heterogeneity effects are greatest.     

The effects of agglomeration economies on technical efficiency of manufacturing firms: evidence from Indonesia

This article examines the effects of agglomeration economies and industrial structure upon firm-level technical efficiency in the Indonesian manufacturing industry over the period 2004–2009. A stochastic production frontier and three channels of agglomeration economies consisting of specialization, diversity and competition are used. The empirical results show that the effects of specialization and diversity upon firm-level technical efficiency are positive and negative, respectively, indicating that specialization is more favourable than diversity for stimulating firms’ technical efficiency. Competition has a positive sign, showing that region with high levels of competition tend to be more conducive in accelerating firm-level technical efficiency. In terms of firm location, both dummy for urban region and industrial complex turn out to be positive, indicating that firms located in both areas are experienced higher technical efficiency. Both firm size and age also have positive effect upon technical efficiency.     

Firm investment and financial conditions in the euro area: evidence from firm-level data

We explore whether the sensitivity of firm-level investment to cash flow, typically associated with an external financing premium, is time-varying and in particular whether it varies with overall financial conditions. We find that financial conditions have indeed played a significant role in corporate investment decisions over recent years, rendering financing constraints even more binding. This finding appears to be robust to a number of control variables and robustness tests. Moreover, the impact of credit conditions is not uniform across firms, but rather it varies depending on firm size and leverage, with constrained firms being substantially more likely to condition their investment decisions on overall credit conditions. Our results cast new light on the interplay between financial and real cycle downturns and underline the need for monetary, fiscal and macroprudential policy to be countercyclical with respect to financial conditions.     

Firm productivity,wages, and agglomeration externalities

Using detailed census data from Morocco, this paper investigates the existence of local externalities in manufacturing. In contrast to many other studies that focus on aggregate employment growth, we examine the effect of externalities on firm-level productivity and wages. Our empirical results show that agglomeration externalities occur through both productivity and wage effects. Returns to specialization are strong and large in magnitude. In accordance with the views of Marshall, Arrow and Romer, the net effect of competition on productivity and wages tends to be negative. Large firms facing no local competition have higher revenues and pay lower wages. We also find some limited evidence in favor of the diversity argument put forth by Jacobs.     

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     

Entrepreneurship and productivity: The slow growth of the planned economies

Trends in gross domestic product (GDP) and total factor productivity (TFP) growth in the former socialist economies seem to indicate that these economies were converging to unusually low long-run growth rates in the late 1980s. In this paper we develop an endogenous growth model of entrepreneurship that is able to account for the difference in long-run performance between centrally planned economies and market-oriented ones. Long-run growth rates of output and productivity are determined by the growth of the stock of managerial knowledge, which in turn depends on the share of the population involved in entrepreneurial activities and on the time that spent on those activities. We analyze the effect of two characteristics of centrally planned economies on their growth performance. First, in centrally planned economies factors of production are distributed by the central planner to the firms' managers through a contest that uses up some of the managers' productive effort. Second, the leadership is “egalitarian,” in the sense that it treats individuals with different abilities equally. We show that these two features reduce the fraction of people becoming entrepreneurs/managers, as well as their managerial effort, which in turn reduces long-run output and TFP growth. Furthermore, we find that centrally planned economies have lower income inequality and slightly higher capital–output ratios, which is consistent with these countries' experiences.     

How migration restrictions limit agglomeration and productivity in China

China strongly restricts rural–urban migration, resulting in a well acknowledged surplus of labor in agriculture. But migration is also restricted within sectors. This paper argues that these intra-sector restrictions lead to insufficient agglomeration of economic activity in both the rural industrial and urban sectors, with resulting first order losses in GDP. For urban areas the paper estimates a city productivity relationship, based on city GDP numbers. The effects of access, educational attainment, FDI, and public infrastructure on productivity are estimated. Given these, worker productivity is shown to be an inverted U-shape function of city employment, with the peak point shifting out as industrial composition moves from manufacturing to services, as predicted by urban theory. As far as we know this is the first paper to actually estimate the relationship between output per worker and city scale for any country. The majority of Chinese cities are shown to be potentially undersized—below the lower bound on the 95% confidence interval about the size where their output per worker peaks. The paper calculates the large gains from increased agglomeration in both the rural industrial and urban sectors.     

Business environment,economic agglomeration and job creation around the world

This article looks at how economic agglomeration and the business environment affect job creation. The results suggest that economic agglomeration is strongly linked to job growth. Modern telecommunications, access to export markets, concentration of economic activity in large cities and capacity agglomeration, in particular, are important. In contrast, many areas of the business environment, including corruption, macroeconomic stability and infrastructure are not robustly linked to job growth. The main exception to this is that areas of the business environment directly related to labour markets are more consistently linked to job growth than other areas of the business environment.     

FDI,taxes and agglomeration economies in the EU15

This article provides an empirical analysis of the impact of tax differentials and agglomeration economies on Foreign Direct Investment (FDI). The article departs from most previous work on FDI and tax competition in a number of ways. First, it incorporates several measures of agglomeration in order to investigate whether agglomeration economies mitigate the downward spiral in tax rates. As the strength of agglomeration economies may vary with the degree of integration, we use a panel of bilateral FDI flows for a highly integrated region including countries with similar economic structure – the EU15 – from 1986 to 2004. Second, the empirical analysis explicitly deals with the problem of selection bias by using the Heckman sample selection approach. Also, by focusing on the EU15, we are able to provide additional information on the determinants of FDI between similar, higher-income countries. The empirical analysis provides some evidence of corporate marginal effective tax rates having an impact on FDI. This result, however, is sensitive to the inclusion of agglomeration economies. In particular, we find both Marshall types of technological externalities and overall concentration of economic activity to have an influence on FDI flows and, moreover, mitigating the negative impact of taxes.     

Foreign investment regulation and firm productivity: Granular evidence from Indonesia

When regulating foreign direct investment (FDI), countries often face a trade-off between pursuing national policy interests and suffering efficiency losses due to FDI restrictions. We demonstrate the presence of this trade-off in the case of a protectionist FDI policy in Indonesia. Using a yearly census of Indonesian manufacturing firms from 2000 to 2015, we link product-level changes in binding FDI regulation due to major regulatory tightening to changes in firm-level productivity. Controlling for an extensive set of fixed effects as well as potential political economy drivers of regulation, we show that a tightening of the regulatory environment was successful in reducing foreign capital reliance among regulated firms, and led to increases in FDI among non-regulated firms producing the same product. Despite compensating increases in domestic capital, regulated firms experienced relative productivity losses. This points towards either a less efficient allocation of domestic capital or a general inferiority of domestic capital as compared to foreign investments.     

Offshoring,wages, and employment: Theory and evidence

This paper investigates the wage and employment effects of offshoring. I use firm-level data and two events in Mexico as a natural experiment to identify the effects of a fall in the marginal cost of offshoring to Mexico. I find that domestic wages actually rise at US firms likely to take advantage of this new offshoring opportunity. At the same time, domestic wages fall at US firms unlikely to take advantage of this opportunity. Furthermore, I find no evidence of greater domestic job loss at the former compared to the latter firms. These findings are consistent with productivity effects from offshoring. To explain the mechanism, I develop a theoretical framework that combines heterogeneous firms with imperfect labor markets and rent-sharing. Firms likely to take advantage of new offshoring opportunities increase their productivity and profitability at the expense of their competitors. Through rent-sharing, this channel leads to higher domestic wages at the former firms relative to the latter. Further, there is no empirical evidence of greater domestic job loss at the firms likely to expand their offshoring compared to their competitors that are unlikely to increase their offshoring.     

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.     

Firm heterogeneity in productivity across Europe: evidence from multilevel models

This paper analyses the Total Factor Productivity (TFP) heterogeneity of a sample of manufacturing firms operating in seven EU countries (Austria, France, Germany, Hungary, Italy, Spain and the UK). TFP data refer to 2008. The empirical setting is based on the multilevel modeling which provides two main results. Firstly, we show that TFP heterogeneity is largely due to firm-specific features (85% of TFP variability in the empty model). Interestingly, we find that some key-drivers of firm performance (size, family management, group membership, innovations and human capital) are significantly related to TFP, but do not, on the whole, absorb much of firm TFP variance, implying that differences in productivity are due to notable yet unobservable firm characteristics. Secondly, as far the role of localization is concerned, we demonstrate that the country effect is more influential than region effect in explaining individual productivity. Net of the country effect, the localization in different European regions explains about 5% of TFP firm heterogeneity. When considering the case of three individual countries, France, Italy and Spain, location in different regions explains 5.3% of TFP heterogeneity in Italy, while this proportion is lower (3.6%) in France and higher (9.9%) in Spain.     

Firm heterogeneity in TFP,sectoral innovation and location. Evidence from Italy

Sectoral and territorial specificities affect a firm’s capabilities of being productive. While there is a wide consensus on this, a quantitative measure of these effects has been lacking. To this end, we combine a data-set of Italian firms with some meso regional and sectoral variables and apply a cross-classified model that allows for a clear distinction between firm, region-specific and sector-specific effects. After observing a marked TFP heterogeneity across firms, the paper addresses the issue of understanding how much differences in firms’ productivity depend on regional localisation and sector specificities. Results refer to 2004–2006 and have three aspects. First, they confirm that the main source of firm variety is mostly due to differences revealed at individual level. Secondly, we find that the sector is more important than location in explaining firms’ TFP. Lastly, the results show that firm TFP increases when it belongs to more innovative sectors. Similarly, companies get benefits from belonging to sectors where there is a high proportion of firms using R&D public support and a high propensity to collaborate in innovative projects.     

E-commerce,R&D,and productivity: Firm-level evidence from Taiwan

This study investigates the impact of e-commerce and R&D on productivity, using a unique panel dataset obtained from Taiwanese manufacturing firms for the period from 1999 to 2002. We specifically consider the network externalities of e-commerce and employ the system generalized method of moment (GMM) technique to deal with the endogenous problem of e-commerce adoption. The empirical results show that both e-commerce and R&D capital have a positive influence on productivity, while R&D exhibits a larger productivity-enhancing effect. We also find a complementary relationship between e-commerce and R&D on enhancing productivity. Crucially, the inter-industry network externality of e-commerce significantly contributes to productivity.     

Firm age and liquidity ratio as predictors of firm growth: evidence from Indian firms

The result of the study shows that liquidity ratio and firm age increases the probability of firm becoming high growth or low growth. However, the result indicates that the chances of being high-growth firm are higher for young firms. Quantile results show that the coefficient of liquidity ratio switches from negative in lower quantiles to become positive in upper quantile with the strong positive effect and firm age coefficients are largest in the lower quantiles. These results also confirm the probit result as per which firm age is negatively significant with the growth of the firm. The present study considers an innovative approach that considers balance sheet issued the year prior to the observation of rapid growth as predictors of firm growth (similar to the credit scoring models, i.e. the Z-score model, to measure the probability of default).     

External economies as a mechanism of agglomeration in EU manufacturing

Productive externalities are significant determinants of agglomeration, not deeply studied at the industry and international level. We analyse the impact on productivity growth of technological externalities, both inter- and intraindustry, national or international, at the industry level for the EU countries and the period 1995–2002. The results confirm the advisability of considering international externalities when countries are taken as regions, whose omission underestimates national spillovers. Together with national endowments and a central geographical position, the growth of productivity is encouraged by national and international specialization as a general result; moreover, it is fuelled by stronger interindustry spillovers and productive diversification, a result more evident for high technology industries, while lower technology industries are more sensitive to the omission of international externalities. Economic integration seems to be relevant, because supranational regions with less friction for goods and factor movements are more likely to take advantage of external economies as a mechanism of productivity growth and agglomeration.     

Informational mobility and productivity: Finnish evidence

The labor productivity effects of portability and connectivity of information and communication technology (ICT) are studied with Finnish firm-level data. It is found that a computer with only processing and storage capabilities boosts labor productivity by 9% (corresponding to 5% output elasticity), portability by 32%, wireline connectivity by 14%, and wireless connectivity by 6%. The findings are in line with previous literature and comparisons to ICT costs suggest that firms equate marginal costs and returns. Although increasing ICT penetration can no longer be a major source of productivity growth in developed economies, the relatively new characteristics studied can.