What are the drivers of total factor productivity in the European Union?

This paper examines the evolution of total factor productivity (TFP) over time, as well as across countries and sectors, and investigates its determinants. To this end, a panel data set of 17 European Union (EU) countries and 13 sectors over the period 1995–2007 is used as part of a twofold approach. First, we estimate aggregate and sectoral TFP for 17 EU countries by means of the augmented mean group estimator to control for endogeneity, cross-section dependence and heterogeneous production technologies. Second, we investigate the relative importance of the drivers of predicted TFP using a dynamic ordinary least-squares estimator. The results indicate that rationalization, human capital and information and communication technologies are the main drivers of TFP.     

Do earnings subsidies affect job choice? The impact of SSP subsidies on job turnover and wage growth

Abstract .  This paper explores the impact of earnings subsidies on job duration and wage growth. We develop an analytical framework that predicts that convex subsidies increase job turnover and affect within-job and between-job wage growth. This framework is used to analyze the effects of the Canadian Self-sufficiency Project earnings subsidy. We find that the treatment group had shorter job duration and experienced faster wage growth than controls, which is consistent with the analytical model. Results for between-job wage growth hold after we correct for compositional bias, but we cannot rule out that within-job wage growth was not affected by the program.     

Can total factor productivity explain value added growth in services?

This paper examines the factors responsible for generating the services led growth witnessed in the Indian economy during 1980–2005. A sectoral growth accounting exercise shows that total factor productivity (TFP) growth was the fastest for services; moreover this TFP increase was significant in accounting for service sector value added growth. A growth model with agriculture, industry and services as three principal sectors is calibrated to Indian data using sectoral TFP growth rates. The baseline model performs well in accounting for the evolution of value added shares and their growth rates, but is unable to capture sectoral employment share trends. The performance of the model with respect to value added shares improves when the post 1991 increase in service sector TFP growth following the inception of market-based liberalization reforms is accounted for. A modified version of the model with public capital can better track trends in sectoral employment shares.     

Input–output evidence on the relative price effects of total productivity shift

This paper provides empirical evidence on the relative price effects of a notional shift in total productivity using data from ten Symmetric Input–Output Tables of five European economies. The results suggest that the direction of the price-movements is, more often than not, governed by the (traditional) labour cost condition and this could be connected to the effective ranks of the matrices of the relative shares of the capital goods.     

The impact of pharmaceutical innovation on longevity and medical expenditure in Sweden, 1997–2010: evidence from longitudinal,disease-level data

We use longitudinal, disease-level data to analyze the impact of pharmaceutical innovation on longevity and medical expenditure in Sweden, where mean age at death increased by 1.88 years during the period 1997–2010. Pharmaceutical innovation is estimated to have increased mean age at death by 0.60 years during the period. The estimates indicate that longevity depends on the number of drugs to treat a disease, not the number of drug classes. Pharmaceutical innovation also reduced hospital utilization; the estimates indicate that an increase in the number of drugs commercialized for a disease reduces the number of hospital days due to the disease 8 years later, primarily due to its effect on the number of hospital discharges. The cost per life-year gained from the introduction of new drugs is estimated to be a small fraction of leading economists’ estimates of the value of a 1-year increase in life expectancy.     

The Impact of Deregulation during 1990–1997 on Banking in Austria

The operating environment for banking in Austriachanged substantially during 1990–1997. The changes during the periodcan be seen as a gradualadjustment towards adherence to European banking standards, which becamea legal requirement on Austria's entry, in 1995, into the European Union. Inthis paper, we investigate the relative performance of Austrian banksduring this period and thereby test the hypothesis of increasedcompetition. The study reveals that Aktiengesellschaften hadconsistent productivity improvement over the period, Sparkassen,and Volksbanken exhibited a turnaround in productivity in 1997,and Raiffeisenbanken experienced consistent productivity decline.Overall, Austrian banks experienced a decline in average efficiencyand productivity until 1996 with slight improvements in 1997. Thestudy reveals evidence of product diversification rather thanincreased price competition; a decrease in the spread of prices paidfor inputs indicates increased competitiveness over the period, whichcan be attributed to deregulation brought about by EU-membership.     

Knowledge spillovers,absorptive capacity and total factor productivity in China’s manufacturing firms

Applying the stochastic frontier framework, this study explores the diffusion and absorption of technological knowledge in China’s manufacturing firms, based on a panel of more than 10,000 local and foreign-invested firms over the period 1998–2001. Our empirical approach allows us to distinguish between technological progress (TP) and technical efficiency (TE) in analysing whether R&D, exports and the presence of foreign direct investment simultaneously enhance TP through knowledge spillovers in a single framework and whether different types of domestic absorptive capacity moderate external knowledge spillovers in relation to TE. The results show that there are positive inter-industry productivity spillovers from R&D and foreign presence, whereas evidence of intra-industry productivity spillovers from FDI to Chinese firms is less robust. We find evidence that absorptive capacity is one of the key determinants to quantitatively explain intra-industry differences in productivity of local Chinese firms. The findings have important policy implications.     

The impact of regional trade policy uncertainty on the productivity of Chinese export enterprises: The case of China–ASEAN Free Trade Area

Reduction of regional trade policy uncertainty is critical for promoting Chinese export enterprise productivity and will help the economy enter the high-quality development stage. We use the case of the China–ASEAN Free Trade Area to empirically tests the impact of the reduction of regional trade policy uncertainty on the productivity of Chinese export enterprises. We apply the difference-in-difference method to micro-enterprise level data from the “China industrial enterprise database” and “China Customs enterprise database” for 2007–2013. Our analysis and results show that establishing the China–ASEAN Free Trade Area has dramatically reduced regional trade policy uncertainty, significantly impacting the productivity of Chinese enterprises exporting to ASEAN. The results also show that enterprises with different ownership types, regions, factor density, and pollution emission intensity show significant heterogeneity in the level of productivity improvement. Applying a mechanism test, we found that the promotion of productivity from a reduction of regional trade policy uncertainty is achieved through the learning effect, the competition effect, and improving the trade environment of imported intermediate goods. The learning effect mechanism has the highest contribution, accounting for 39.01% of the net effect. The empirical results provide novel insight into promoting the productivity of Chinese enterprises exporting to ASEAN from the perspective of reducing regional trade policy uncertainty.     

The impact of hiring top workers on productivity: what is the role of absorptive capacity?

We examine the heterogeneous productivity impacts of hiring top workers on small and medium-sized enterprises, exploiting matched employer–employee panel data and employing within-firm as well as matching and difference-in-difference estimators. The results provide robust evidence that the productivity impact is stronger for firms with higher absorptive capacity. Technological laggards within an industry benefit more strongly from hiring top workers if their workforce is more well-educated.     

Spatial analysis of change trend and influencing factors of total factor productivity in China’s regional construction industry

Total factor productivity (TFP) is a measure of long-term economic growth and a comprehensive industry-level productivity measure. There are large gaps in China’s regional construction industry development due to unbalanced regional economy. Based on TFP measurement, this article puts forward a two-hierarchical analysis framework with coefficient of variation, Moran scatterplot and coefficient of convergence to analyse change trend of the construction industry TFP in three major regions in terms of spatial diversity, correlation and convergence. Then, the geographically weighted regression model is utilized to explore the influencing mechanism on the TFP. The results indicate the differences of the regional construction industry TFP are enlarging. There is obvious spatial correlation and heterogeneity in the regional TFP without a relatively stable space pattern. The TFP also exhibits convergence effects among three major regions. The construction industry productivity in all regions is significantly affected by economic environment, industrial organization structure and technological level. Industrial organization structure exerts the various influences on the productivity in different regions.     

The impact of exogenous shocks on exits from the Catholic and Protestant churches in Germany, 1953–2015

In Germany, exits from the Catholic and Protestant churches have fluctuated considerably over the last 60 years. Much of the observable variation in these exits can be explained by exogenous shocks such as unpopular encyclicals by the Pope, German reunification, sexual abuse cases and financial scandals.     

The impact of product market competition on GDP per capita growth in the EU countries: does the model of capitalism matter?

This article assesses whether the intensity of product market competition is a factor affecting economic growth (measured by the growth rate of real GDP per capita) and whether this impact depends on the model of capitalism. The study covers the 1997–2015 period and all EU28 countries. Product market competition is measured by two types of variables: product market regulation indicators and the number of enterprises. New elements in the analysis include, among others, nonlinear impact and overlapping observations. The regression equations are estimated on the basis of Blundell and Bond’s GMM system estimator. The results generally indicate that stronger product market regulations (and theoretically lower product market competition) are linked with faster growth of output. However, the impact of product market competition on economic growth depends on the type of capitalism. For post-socialist countries, unlike the Western European model of capitalism, more regulation tends to reduce the rate of economic growth.     

The impact of science and technology parks on firms’ product innovation: empirical evidence from Spain

Science and Technology Parks (STP) have attracted considerable attention and public funds in recent years. However, the conclusions on their effectiveness remain mixed. This work evaluates the impact of STP on firm product innovation in the Spanish context, as an example of a less developed innovation system in which regional and national governments are prioritizing STP initiatives. This work draws on a large sample of firms provided by the Spanish Survey on Technological Innovation that is conducted annually by the National Statistical Institute. We explore alternative econometric methods to obtain average treatment effects for firms located in 22 Spanish STPs. Our results show that Spanish STPs have a strong and positive impact on the probability and amount of product innovation achieved by STP located firms. These results hold when the endogeneity of STP location is taken into account.     

How important are human capital, physical capital and total factor productivity for determining state economic growth in the United States, 1840–2000?

This paper introduces new data on state-level physical capital by sector and land in the farm sector for the states of the United States from 1840 to 2000. These data are incorporated into aggregate accounting exercises with the aim of comparing cross-state results to those found in cross-country samples. Our aggregate results agree closely with the cross-country literature: input accumulation accounts for most of output growth, between three-fifths and three-quarters, but variation in the growth of TFP accounts for about three-quarters of the variation in the growth rate of output per worker. In convergence accounting, convergence of log TFP accounts for about seventy percent of the observed convergence in log output per worker.     

The potential impact of China–US BIT on China’s manufacturing sectors

This article finds that the overall effect of the foreign direct investment (FDI) and thereby the China–US bilateral investment treaties (BIT) on Chinese manufacturing sector is positive, which raises the productivity and profitability of the firms, using various econometric models and other evidence. The manufacturing sector as a whole has already opened up to the world economy and needs to continue this process. The industries in the manufacturing sector do not need to be protected, except for in limited fields related to national security, scarce natural resources and well-defined strategic sectors. Gradual lifting of the protection may be needed in the short-run for a small number of vulnerable sectors. A moderate relaxing of the current restrictions will increase FDI in manufacturing from all countries by 4–8% under different assumptions. This effect will be small when only considering FDI from the USA. Domestic firms need to update their technology, reduce costs and learn management skills from their foreign competitors, while using the national treatment terms in BIT to enter the fields that are not open to domestic firms under current regulations. Domestic firms also need to set up firm-level global strategies and reallocate firms’ resources according to the changing investment environment, taking advantage of profit opportunities outside the domestic markets.     

Effects of exports on productivity and growth in India: an industry–based analysis

This study analyses the effects of exports on the level of output per capita using the panel estimates of an extended version of the Mankiw, Romer and Weil (The Quarterly Journal of Economics, CVII, 407-37, 1992) model, and on the total factor productivity using the time series estimators. The analysis is carried out for ten industries in the manufacturing sector in India. The results do not provide any evidence of convergence, and instead support the contrary evidence of divergence among industries. The exports do not induce convergence and instead seem to accentuate the process of divergence among industries. The study provides some evidence for the significant effects of exports on the level of output per capita and TFP in the manufacturing sector. The effects of exports on TFP are significant in half of the sample industries, while in the remaining half these are statistically insignificant.     

A Regional Analysis of Hidden Unemployment in Great Britain, 1951–1966

Using data from a panel of 15 countries over the period 1990–1998, the determinants of the use of non cash payment instruments are analysed. The estimation results highlight the importance of distinguishing between the determinants of the value and volume of noncash transactions. It is found in fact that the volume of these transactions is generally affected by changes in the determinants more strongly than their value, and that variables such as the interest rate have a different impact on the volume and the value of the transactions. The findings also suggest that past habits play a dominant role in the intensity of use of noncash payment instruments.     

The impact of terrorism on expectations,trust and happiness – the case of the November 13 attacks in Paris,France

I use quasi-experimental evidence to measure the impact of the 13 November 2015 attacks in Paris, France, on various channels through which terrorism can affect the economy. The evidence suggests the attacks reduced optimism and increased trust in the national government but did not affect current life satisfaction nor political orientation.     

The impact of private equity on firms׳ patenting activity

The paper analyses the impact of private equity (PE) backed leveraged buyouts (LBOs) on innovative output (patenting). Using a sample of 407 UK deals we find that LBOs have a positive causal effect on patent stock and quality-adjusted patent stock. Our results imply a 6% increase in quality-adjusted patent stock three years after the deal. The increase in innovative activity is concentrated among private-to-private transactions with a 14% increase in the quality-adjusted patent stock. We also find evidence suggesting that PE firms facilitate the relaxation of financial constraints. In sum, our findings suggest that PE firms do not promote short-term cost-cutting at the expense of entrepreneurial investment opportunities with a long-term pay-off.