Short-run labor productivity in a dynamic model

A classic empirical finding is that the short-run output elasticity of demand is smaller than unity and is less than in the long run. This phenomenon is called ‘short-run increasing returns to labor’ (SRIRL). In this paper we analyze SRIRL using a dynamic factor demand model for variable and quasi-fixed inputs, where the latter incur increasing marginal internal adjustment costs. Speeds of adjustment of quasi-fixed inputs are endogenous and variable, not constant parameters. Labor hoarding is shown to be neither necessary nor sufficient for SRIRL. These results are illustrated empirically using annual U.S. manufacturing data, 1952-71.     

The true cost of labor turnover

Managers can analyze the true cost of their labor turnover with the help of these six formulas, and thereby rationally compute trade-off solutions between programs designed to reduce labor turnover and the true cost of labor turnover.     

Union algebra: Unionization,productivity and labor intensity restrictions

Two models are developed to investigate unionism effects. The first assumes Cobb-Douglas technology, derives an explicit cost function allowing for noncost minimization and separates productivity and labor intensity effects. The second assumes a more flexible translog shadow cost function and isolates a neutral productivity effect and factor-specific composite effects. The models are estimated using Allen's construction data. Both models indicate a positive union productivity effect in office construction and a negative union productivity effect in school construction. The Cobb-Douglas model indicates a binding labor-to-materials restriction in both office and school construction, but this evidence disappears with the nonminimum cost function.     

Global Malmquist and cost Malmquist indexes for group comparison

Journal of Productivity Analysis - The Malmquist index (MI) has demonstrated its usefulness in comparing the performances of Decision Making Units (DMUs) performances. The global MI (GMI) has been...     

Accounting for growth in retail trade: an international productivity comparison

In this paper we argue that the standard approach for measuring output and productivity in the trade sector has become obsolete. The key problem is that changes in prices of goods purchased for resale are not accounted for. We outline a consistent accounting framework for measuring trade productivity and provide new estimates, taking into account purchase prices of goods sold in a double deflation procedure. We find strong productivity improvements in the UK and US compared to France, Germany and The Netherlands since the mid-1990s. This finding is robust for various productivity measurement models.

Cost Malmquist productivity index: an output-specific approach for group comparison

The cost Malmquist productivity index (CMPI) has been proposed to capture the performance change of cost minimizing Decision Making Units (DMUs). Recently, two alternative uses of the CMPI have been suggested: (1) using the CMPI to compare groups of DMUs, and (2) using the CMPI to compare DMUs for each output separately. In this paper, we propose a new CMPI that combines both procedures. The resulting methodology provides group-specific indexes for each output separately, and therefore offers the option to identify the sources of cost performance change. We also define our index when input prices are not observed and establish, in that case, a duality with a new technical productivity index, which takes the form of a Malmquist productivity index. We illustrate our new methodology with a numerical example and an application to the US electricity plant districts.     

Estimating total factor productivity using parametric,nonstochastic cost frontiers

The standard approach to measuring total factor productivity can produce biased results if the data are drawn from a market that is not in long-run competititve equilibrium. This article presents a methodology for adjusting data on output and variable inputs to the values they would have if the market were in long-run competitive equilibrium, given the fixed inputs and input prices. The method uses nonstochastic, parametric translog cost frontiers and calculates equilibrium values for output and varible inputs using an iterative linear programming procedure. Data from seven industries for 1970–1979 are used to illustrate the methodology.The editor for this paper was William H. Greene.     

Measuring productivity in the public sector: some conceptual problems

In many sectors of the economy, governments either provide various services at no cost or at highly subsidized prices. Examples are the health, education and general government sectors. The paper analyzes three possible general methods to measure the price and quantity of nonmarket government outputs. If quantity information on nonmarket outputs is available, then the first two methods of price valuation rely on either purchaser based valuations or on cost based valuations. If little or no information on the quantity of nonmarket outputs produced is available, then the method recommended in the System of National Accounts 1993 must be used, where aggregate output growth is set equal to aggregate input growth. The paper also discusses various methods of adjusting for quality change.     

Measuring input-specific productivity change based on the principle of least action

In for-profit organizations, efficiency and productivity measurement with reference to the potential for input-specific reductions is particularly important and has been the focus of interest in the recent literature. Different approaches can be formulated to measure and decompose input-specific productivity change over time. In this paper, we highlight some problems within existing approaches and propose a new methodology based on the Principle of Least Action. In particular, this model is operationalized in the form of a non-radial Luenberger productivity indicator based on the determination of the least distance to the strongly efficient frontier of the considered production possibility sets, which are estimated by non-parametric techniques based upon Data Envelopment Analysis. In our approach, overall productivity change is the sum of input-specific productivity changes. Overall productivity change and input-specific changes are broken up into indicators of efficiency change and technical change. This decomposition enables the researcher to quantify the contributions of each production factor to productivity change and its components. In this way, the drivers of productivity development are revealed. For illustration purposes the new approach is applied to a recent dataset of Polish dairy processing firms.     

ICT labor,software usage,and productivity: firm-level evidence from Turkey

Journal of Productivity Analysis - This paper examines the impact of information and communication technology (ICT) on firm-level productivity in Turkey using a novel longitudinal data set. We...     

Measuring productivity of research in economics: A cross-country study using DEA

We measure productivity in leading edge economic research by using data envelopment analysis (DEA) for a sample of 21 countries belonging to the Organization for Economic Cooperation and Development (OECD). Publications in ten top journals of economics from 1980 to 1998 are taken as the research output. Inputs are measured by R&D expenditure, the number of universities with economics departments and (as an uncontrollable variable) population. Under constant returns-to-scale, the US emerges as the only efficient country. Under variable returns-to-scale, the efficiency frontier is defined by the US, Ireland and New Zealand. With the exception of the US, all countries in our sample display increasing returns-to-scale, and thus have the potential to raise their efficiency by scaling up their research activities.     

Sticky prices, fair wages, and the co-movements of unemployment and labor productivity growth

This paper studies the co-movements of unemployment and labor productivity growth for the U.S. economy. Measures of co-movements in the frequency domain indicate that co-movements between variables differ strongly according to the frequency. First, long-term and business cycle co-movements are larger than short-term co-movements. Second, co-movements are negative in the short and long run, but positive over the business cycle. A New Keynesian model that combines nominal rigidity on the goods market (sticky prices) and real rigidity on the labor market (fair wages) is shown to be quantitatively consistent with the observed co-movements both in the long term and over the business cycle. However, the model fails to explain the short-term co-movements.     

A general equilibrium assessment of COVID-19's labor productivity impacts on china's regional economies

Journal of Productivity Analysis - This study introduces a database for analyzing COVID-19’s impacts on China’s regional economies. This database contains various sectoral and regional...     

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.     

Measuring immigration's effects on labor demand: A reexamination of the Mariel Boatlift

Why do immigration shocks tend to have benign effects on native wages? One reason is that immigrants as consumers contribute to the demand for their services. We model an economy where workers spend their wages on a locally produced good, then test it via a reexamination of the 1980 “Mariel Boatlift” using Wacziarg's Channel Transmission methodology. Current Population Survey data on workers in 9 different retail labor markets and Survey of Buying Power data on retail spending by consumers in Miami and four comparison cities are used. We find strong evidence that the Mariel Boatlift augmented labor demand.     

Measuring technical and allocative efficiencies for banks in the transition countries using the Fourier flexible cost function

The transition economies are known to have quite different market structures from the market economies. State-owned banks accounts for a major part of the financial sector in East European countries before the transition period. Since the input prices of the sector are frequently under the control of those governments, the misallocated resources may incur the loss of economic efficiency. This paper attempts to gauge the technical and allocative efficiency using unbalanced panel data of 340 banks from 14 transition countries under the framework of the Fourier flexible shadow cost function. Accommodating technical and allocative efficiencies simultaneously, as suggested by Atkinson and Cornwell (Int Econ Rev 35:231–243, 1994a) and Kumbhakar and Wang (J Econom 134:317–340, 2006a), avoids potential specification errors and leads to consistent parameter estimates. The average total cost savings resulting from greater technical and allocative efficiency are around 28.31 and 7.13%, respectively. Foreign-owned banks are found to be the most economically efficient. The enforcement of financial liberalization does gradually improve upon the sample banks’ technical efficiency. The allocative inefficiency arises from over capitalization and excess funds. Scale diseconomies appear to prevail in the sample states with a few exceptions.     

City size and urban labor productivity in China: New evidence from spatial city-level panel data analysis

The previous literature has generally found that most Chinese cities were undersized in the 1990s. However, little is known about how urban agglomeration in China has evolved since the country began to experience much faster urbanization and deep marketization after 2000. Based on panel data of 281 cities between 2000 and 2013, our spatial panel data regression results show that the scale impact of city size on urban productivity appears to have an inverted U shape, and its effect will grow when the cities’ industrial structure becomes more dominated by the service sector. There are also significant spatial interactions and spatial heterogeneity of urban agglomeration among Chinese cities. Furthermore, we compute the optimal size for each city and find that most Chinese cities are still undersized in recent years. Based on our findings, we argue that the Chinese government should focus on promoting sufficient growth of medium sized cities in its new urbanization strategy.     

Accounting for labor demand effects in structural labor supply models

When assessing the effects of policy reforms on the labor market, most studies only focus on labor supply. The interaction of supply and demand is not explicitly modeled, which might lead to biased estimates of potential labor market outcomes. This paper proposes a straightforward method to remedy this shortcoming. We use information on firms' labor demand behavior and feed them into a structural labor supply model, completing the partial analysis of the labor market on the microdata level. We show the performance and relevance of our extension by introducing a pure labor supply side reform, the workfare concept, in Germany and simulating the labor market outcome of the reform. We find that demand effects offset about 25% of the positive labor supply effect of the policy reform.