On modeling the determinants of TFP growth

We investigate the determinants of TFP growth of Italian manufacturing firms. Using stochastic frontier techniques, we consider three approaches for taking into account the influence of external factors, i.e., the determinants or drivers of growth. First, in our novel approach external factors may influence the technological progress, that is the shift of the frontier. To model this possible unexplored effect, we extend the standard time trend model to make it a function of the external factors. Then, following more standard approaches, we model external factors as either influencing the distance from the frontier, i.e., inefficiency, or the shape of the technology. Using a sample of manufacturing firms in 1998–2003, we find that technological investments and spillovers, human capital and regional banking inefficiency all have a significant effect on TFP growth.     

Credit quality and technical efficiency in banking

We estimate banks’ technical efficiency using directional distance functions, a generalization of the radial distance functions that allow us to credit banks for their efforts to increase outputs and decrease resource use and bad loans. We find that once bad loans are considered, banks’ efficiency increases significantly. In addition, omitting bad loans may result in the underestimation of the performance of good credit quality banks. These results suggest that a significant aspect of banking production, credit quality, needs to be considered when evaluating banks’ performances for regulatory purposes.     

Be productive or face decline. On the sources and determinants of output growth in Italian manufacturing firms

This article investigates the sources and determinants of output growth of Italian manufacturing firms. Applying stochastic frontier techniques, we decompose output growth into factor accumulation and TFP growth for the period 1998–2003. TFP growth is further decomposed into technological change, efficiency change and scale effects. Two key results emerge from the analysis. After confirming that both input accumulation and TFP growth are important in explaining output growth, we show that efficiency change (technological catch-up) is the most significant component of TFP growth in explaining output growth distribution. Furthermore, using a specific model of the asymmetric error component, we find that R&D spillovers, banking efficiency and public infrastructures have statistically significant and economically relevant effects on technological catch-up.     

Productivity or Discrimination? Beauty and the Exams*

Do good looks make people more productive? An impact of looks on earnings has been found in the empirical literature: plain people earn less than average‐looking people who in turn earn less than good‐looking people. However, an important question remains unanswered: is the impact of beauty due to pure discrimination or productivity? We provide evidence against the hypothesis of Becker‐type discrimination stemming from tastes and in favour of productivity‐related discrimination.     

A Nonparametric Analysis of Production Models with Multidimensional Quality

This article proposes a methodology to measure the characteristics of intermediate products when quality is multidimensional. It uses a general representation of the multioutput technology via directional distance functions and constructs quality indicators based on differences rather than ratios. The quality indicators may be used to evaluate firms' output, taking into account the whole set of quality attributes. The paper explores how aggregate quality may vary with the production level and finds a trade-off between quantity and aggregate quality in wine grapes.