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"Production functions"
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Entrepreneurship, institutional economics, and economic growth: an ecosystem perspective
We analyze conceptually and in an empirical counterpart the relationship between economic growth, factor inputs, institutions, and entrepreneurship. In particular, we investigate whether entrepreneurship and institutions, in combination in an ecosystem, can be viewed as a \"missing link\" in an aggregate production function analysis of cross-country differences in economic growth. To do this, we build on the concept of National Systems of Entrepreneurship (NSE) as resource allocation systems that combine institutions and human agency into an interdependent system of complementarities. We explore the empirical relevance of these ideas using data from a representative global survey and institutional sources for 46 countries over the period 2002-2011. We find support for the role of the entrepreneurial ecosystem in economic growth.
Journal Article
Markups and Firm-Level Export Status
In this paper, we develop a method to estimate markups using plantlevel production data. Our approach relies on cost-minimizing producers and the existence of at least one variable input of production. The suggested empirical framework relies on the estimation of a production function and provides estimates of plant-level markups without specifying how firms compete in the product market. We rely on our method to explore the relationship between markups and export behavior. We find that markups are estimated significantly higher when controlling f or unobserved productivity; that exporters charge, on average, higher markups and that markups increase upon export entry.
Journal Article
Estimating Production Functions When Output Prices and Quality Are Unobserved
In this work, we propose a technique for consistently estimating production functions when output prices and quality are unobserved. Unobserved output prices and product quality are correlated with inputs and will lead to bias when we estimate production functions with traditional approaches. We show that the markup can serve as a control function for unobserved prices and quality and address the problems caused by them. The markup can be computed with candidate parameters and data, so our approach does not need more data than traditional approaches. We implement our method as an extension of the proxy-variable approach to estimating production functions. The empirical results give strong and consistent support to our method.
Journal Article
The Production Function for Housing: Evidence from France
We propose a new nonparametric approach to estimate the production function for housing. Our estimation treats output as a latent variable and relies on a first-order condition for profit maximization combined with a zero-profit condition. More desirable locations command higher land prices and, in turn, more capital to build houses. For parcels of a given size, we compute housing production by summing across the marginal products of capital. For newly built single-family homes in France, the production function for housing is close to constant returns and is well, though not perfectly, approximated by a Cobb-Douglas function with a capital elasticity of 0.65.
Paper
R&D and Productivity: Estimating Endogenous Productivity
We develop a model of endogenous productivity change to examine the impact of the investment in knowledge on the productivity of firms. Our dynamic investment model extends the tradition of the knowledge capital model of Griliches (1979) that has remained a cornerstone of the productivity literature. Rather than constructing a stock of knowledge capital from a firm's observed R&D expenditures, we consider productivity to be unobservable to the econometrician. Our approach accounts for uncertainty, non-linearity, and heterogeneity across firms in the link between R&D and productivity. We also derive a novel estimator for production functions in this setting. Using an unbalanced panel of more than 1800 Spanish manufacturing firms in nine industries during the 1990s, we provide evidence of non-linearities as well as economically significant uncertainties in the R&D process. R&D expenditures play a key role in determining the differences in productivity across firms and the evolution of firm-level productivity over time.
Journal Article
Firm ownership and productivity: a study of family and non-family SMEs
Motivated by a lack of consensus in the current literature, the objective of this paper is to reveal whether family firms are more or less productive than non-family firms. As a first step, this paper links family business research to the theoretical notion that family involvement has an effect on the factors of production from a productivity standpoint. Second, by using a Cobb-Douglas framework, we provide empirical evidence that family labour and capital indeed yield diverse output contributions compared with their non-family counterparts. In particular, family labour output contributions are significantly higher, and family capital output contributions significantly lower. Interestingly, differences in total factor productivity between family and non-family firms disappear when we allow for heterogeneous output contributions of family production inputs. These findings imply that the assumption of homogeneous labour and capital between family and non-family firms is inappropriate when estimating the production function.
Journal Article
A new approach to estimating the metafrontier production function based on a stochastic frontier framework
This paper proposes a new two-step stochastic frontier approach to estimate technical efficiency (TE) scores for firms in different groups adopting distinct technologies. Analogous to Battese et al. (J Prod Anal 21:91-103, 2004), the metafrontier production function allows for calculating comparable TE measures, which can be decomposed into group specific TE measures and technology gap ratios. The proposed approach differs from Battese et al. (J Prod Anal 21:91-103, 2004) and O'Donnell et al. (Empir Econ 34:231-255, 2008) mainly in the second step, where a stochastic frontier analysis model is formulated and applied to obtain the estimates of the metafrontier, instead of relying on programming techniques. The so-derived estimators have the desirable statistical properties and enable the statistical inferences to be drawn. While the within-group variation in firms' technical efficiencies is frequently assumed to be associated with firm-specific exogenous variables, the between-group variation in technology gaps can be specified as a function of some exogenous variables to take account of group-specific environmental differences. Two empirical applications are illustrated and the results appear to support the use of our model.
Journal Article
Automation, growth, and factor shares in the era of population aging
How does population aging affect economic growth and factor shares in times of increasingly automatable production processes? The present paper addresses this question in a new macroeconomic model of automation where competitive firms perform tasks to produce output. Tasks require labor and machines as inputs. New machines embody superior technological knowledge and substitute for labor in the performance of tasks. Automation is labor-augmenting in the reduced-form aggregate production function. If wages increase then the incentive to automate becomes stronger. Moreover, the labor share declines even though the aggregate production function is Cobb–Douglas. Population aging due to a higher longevity reduces automation in the short and promotes it in the long run. It boosts the growth rate of absolute and per-capita GDP in the short and the long run, lifts the labor share in the short and reduces it in the long run. Population aging due to a decline in fertility increases automation, reduces the growth rate of GDP, and lowers the labor share in the short and the long run. In the short run, it may or may not increase the growth rate of percapita GDP, in the long run it unequivocally accelerates per-capita GDP growth.
Journal Article
Cross country comparisons of environmental efficiency under institutional quality. Evidence from European economies
PurposeThe paper aims at addressing the following research questions: does institutional quality improve countries' environmental efficiency? And which pillars of institutional quality improve countries' environmental efficiency?Design/methodology/approachBy specifying a directional distance function in the context of stochastic frontier method where GHG emissions are considered as the bad output and the GDP is referred as the desirable one, the work computes the environmental efficiency into the appraisal of a production function for the European countries over three decades.FindingsAccording to the countries' performance, the findings confirm that high and upper middle-income countries have higher environmental efficiency compared to low middle-income countries. In this environmental context, the role of institutional quality turns out to be really important in improving the environmental efficiency for high income countries.Originality/valueThis article attempts to analyze the role of different dimensions of institutional quality in different European countries' performance – in terms of mitigating GHGs (undesirable output) – while trying to raise their economic performance through their GDP (desirable output).HighlightsThe paper aims at addressing the following research question: does institutional quality improve countries' environmental efficiency?We adopt a directional distance function in the context of stochastic frontier method, considering 40 European economies over a 30-year time interval.The findings confirm that high and upper middle-income countries have higher environmental efficiency compared to low middle-income countries.The role of institutional quality turns out to be really important in improving the environmental efficiency for high income countries, while the performance decreases for the low middle-income countries.
Journal Article