CAP Subsidies and the Productivity of EU Farms. Factor Markets Working Paper No. 37, March 2013

This paper investigates the impact of subsidies from the common agricultural policy on the total factor productivity of farms in the EU. We employ a structural, semi-parametric estimation algorithm, directly incorporating the effect of subsidies into a model of unobserved productivity. We empirically study the effects using samples from the Farm Accountancy Data Network for EU-15 countries. Our main findings are clear: subsidies had a negative impact on farm productivity in the period before the decoupling reform was implemented; after decoupling the effect of subsidies on productivity was more nuanced, as in several countries it turned positive.

Productivity, Technical and Efficiency Change in Singapore’s Services Sector, 2005 to 2008

The current study was motivated by statements made by the Economic Strategies Committee that Singapore’s recent productivity levels in services were well below countries such as the US, Japan and Hong Kong. Massive employment of foreign workers was cited as the reason for poor productivity levels. To shed more light on Singapore’s falling productivity, a nonparametric Malmquist productivity index was employed which provides measures of productivity change, technical change and efficiency change. The findings reveal that growth in total factor productivity was attributed to technical change with no improvement in efficiency change. Such results suggest that gains from TFP were input-driven rather than from a ‘best-practice’ approach such as improvements in operations or better resource allocation.

Measuring and decomposing changes in agricultural productivity, nitrogen use efficiency and cumulative exergy efficiency: Application to OECD agriculture

This paper uses an aggregate quantity space to decompose the temporal changes in nitrogen use efficiency and cumulative exergy use efficiency into changes of Moorsteen–Bjurek (MB) Total Factor Productivity (TFP) changes and changes in the aggregate nitrogen and cumulative exergy contents. Changes in productivity can be broken into technical change and changes in various efficiency measures such as technical efficiency, scale efficiency and residual mix efficiency. Changes in the aggregate nitrogen and cumulative exergy contents can be driven by changes in the quality of inputs and outputs and changes in the mixes of inputs and outputs. Also with cumulative exergy content analysis, changes in the efficiency in input production can increase or decrease the cumulative exergy transformity of agricultural production. The empirical study in 30 member countries of the Organisation for Economic Co-operation Development from 1990 to 2003 yielded some important findings. The production technology progressed but there were reductions in technical efficiency, scale efficiency and residual mix efficiency levels. This result suggests that the production frontier had shifted up but there existed lags in the responses of member countries to the technological change. Given TFP growth, improvements in nutrient use efficiency and cumulative exergy use efficiency were counteracted by reductions in the changes of the aggregate nitrogen contents ratio and aggregate cumulative exergy contents ratio. The empirical results also confirmed that different combinations of inputs and outputs as well as the quality of inputs and outputs could have more influence on the growth of nutrient and cumulative exergy use efficiency than factors that had driven productivity change. Keywords: Nutrient use efficiency; Cumulative exergy use efficiency; Thermodynamic efficiency change; Productivity growth; OECD agriculture; Sustainability

Distribution trade sector output and productivity performance : a case study of Singapore and Hong Kong 2001-2008

This paper employs the industry of origin approach to compare value added and productivity of Singapore and Hong Kong's Distribution Trade Sector for the period 2001-2008. The direct comparison between these two economies was motivated by the statements of the Singapore government: Its services sector, especially in Retail Trade, lags behind Hong Kong's productivity levels. The results show that since 2005, Singapore's Distribution performance in terms of labour productivity was below Hong Kong's level, which was largely due to poor performance in its Retail Trade sector arising from an influx of foreign workers. Results from total factor productivity (TFP) between these two economies also suggest that Hong Kong's better performance (since 2005) was largely due to its ability to employ more educated and trained workers with limited use of capital. The results suggest that polices that worked in Hong Kong may not work for Singapore because its population is more diverse which poses a challenge to policy-makers in raising its productivity level.

Productivity performance of Singapore’s retail sector : a two-stage non-parametric approach

This paper seeks to identify and quantify sources of the lagging productivity in Singapore’s retail sector as reported in the Economic Strategies Committee 2010 report. A two-stage analysis is adopted. In the first stage, the Malmquist productivity index is employed which provides measures of productivity change, technological change and efficiency change. In the second stage, technical efficiency estimates are regressed against explanatory variables based on a truncated regression model. Sources of technical efficiency were attributed to quality of workers while product assortment and competition negatively impacted on efficiency.

Productivity, technical and efficiency change in Singapore’s services sector, 2005 to 2008

The current study was motivated by statements made by the Economic Strategies Committee that Singapore’s recent productivity levels in services were well below countries such as the US, Japan and Hong Kong. Massive employment of foreign workers was cited as the reason for poor productivity levels. To shed more light on Singapore’s falling productivity, a nonparametric Malmquist productivity index was employed which provides measures of productivity change, technical change and efficiency change. The findings reveal that growth in Total Factor Productivity (TFP) was attributed to technical change with no improvement in efficiency change. Such results suggest that gains from TFP were input-driven rather than from a ‘best-practice’ approach such as improvements in operations or better resource allocation.

Efficiency and productivity of Singapore’s manufacturing sector 2001-2010: An analysis using Simar and Wilson’s (2007) bootstrapped truncated approach

This paper seeks to explain the lagging productivity in Singapore’s manufacturing noted in the statements of the Economic Strategies Committee Report 2010. Two methods are employed: the Malmquist productivity to measure total factor productivity change and Simar and Wilson’s (J Econ, 136:31–64, 2007) bootstrapped truncated regression approach. In the first stage, the nonparametric data envelopment analysis is used to measure technical efficiency. To quantify the economic drivers underlying inefficiencies, the second stage employs a bootstrapped truncated regression whereby bias-corrected efficiency estimates are regressed against explanatory variables. The findings reveal that growth in total factor productivity was attributed to efficiency change with no technical progress. Most industries were technically inefficient throughout the period except for ‘Pharmaceutical Products’. Sources of efficiency were attributed to quality of worker and flexible work arrangements while incessant use of foreign workers lowered efficiency.

Output and productivity comparisons of the Singapore and Hong Kong wholesale and retail trade sectors, 2001–2008

This paper employs the industry of origin approach to compare value-added and labour productivity of Singapore and Hong Kong’s wholesale and retail sectors for the period 2001–08. The direct comparison between these two economies was motivated by the statement of the Singapore Government that its services sector, especially the retail sector, lagged behind Hong Kong’s productivity levels. The results show that since 2005, Singapore’s wholesale and retail sector performance in terms of labour productivity has been below Hong Kong’s level, largely due to the poor performance of its retail sector arising from an influx of foreign workers. Results from total factor productivity analysis of these two economies also suggest that Hong Kong’s better performance (since 2005) was largely due to its ability to employ more educated and trained workers with limited use of capital. The results suggest that polices that have worked in Hong Kong may not work in Singapore because its population is more diverse, which poses a challenge to policymakers in raising its productivity level.

Efficiency and productivity of Singapore's manufacturing sector 2001-2010 : an analysis using bootstrapped truncated approach

This paper seeks to explain the lagging productivity in Singapore’s manufacturing noted in the statements of the Economic Strategies Committee Report 2010. Two methods are employed: the Malmquist productivity to measure total factor productivity (TFP) change and Simar and Wilson’s (2007) bootstrapped truncated regression approach which first derives bias-corrected efficiency estimates before being regressed against explanatory variables to help quantify sources of inefficiencies. The findings reveal that growth in total factor productivity was attributed to efficiency change with no technical progress. Sources of efficiency were attributed to quality of worker and flexible work arrangements while the use of foreign workers lowered efficiency.

Productivity and convergence in India : a state-level analysis

Total factor productivity plays an important role in the growth of the Indian economy. Using state-level data from 1993 to 2005 that were recently made available, we find widespread regional variation in productivity changes. In the years immediately following economic liberalization, productivity growth improved technical efficiency; however, in subsequent years, productivity growth was propelled by technological progress. We find a tendency toward convergence with regard to productivity growth among states; however, the states that were technically efficient when the economic reforms were instituted remained innovative in later years.

The pollution release and transfer register system in the U.S. and Japan : an analysis of productivity

This study analyzes Total Factor Productivity (TFP), which includes all categories of productivity. Our measure investigates productivity in the context of the provision and dissemination of environmental information policies. We investigated data on the emission of toxic chemical substances for the U.S. and Japanese manufacturing firms, including 386 firms for the period 1999-2007 and 466 firms for the period 2001-2008. The results show that productivity improved in all nine industrial sectors and that pollution levels were high in the U.S. and Japan from 2001 to 2007. In particular, the electronics industry improved rapidly after 2002 in both countries, which may be attributed to the enforcement of RoHS and the REACH directive in Europe. As a result of these stringent policies on toxic chemical emissions, the U.S. and Japanese firms, many of which export to the European market, have strong incentives to reduce their toxic chemical emissions.

Productivity measures and effects from subsidies and trade : an empirical analysis for Japan's forestry

Several techniques have been proposed in the literature to measure productivity. While allowing for inefficiency of the production unit, we provide a methodological comparison of alternative approaches to measure total factor productivity. This article evaluates the effects of unintended policy outcomes such as government subsidies and foreign trade. Empirically, we analyse the forest productivity of timber in Japan by using panel data on 46 regions. The results suggest substantial variation in productivity between these two techniques although average trends are similar. We find that subsidies impede competition since the government is ready to rescue a loss-making firm with subsidies rather than allow it to close. In contrast, trade is shown to have positive effects on productivity.

The effect of incentive reforms upon productivity : evidence from the Vietnamese rice industry

In this study we use region-level panel data on rice production in Vietnam to investigate total factor productivity (TFP) growth in the period since reunification in 1975. Two significant reforms were introduced during this period, one in 1981 allowing farmers to keep part of their produce, and another in 1987 providing improved land tenure. We measure TFP growth using two modified forms of the standard Malmquist data envelopment analysis (DEA) method, which we have named the Three-year-window (TYW) and the Full Cumulative (FC) methods. We have developed these methods to deal with degrees of freedom limitations. Our empirical results indicate strong average TFP growth of between 3.3 and 3.5 per cent per annum, with the fastest growth observed in the period following the first reform. Our results support the assertion that incentive related issues have played a large role in the decline and subsequent resurgence of Vietnamese agriculture.

Sources of productivity growth in health services : a case study of Queensland public hospitals

Improving the performance of health sector is one of the most popular issues in Australia. This paper contributes to this important policy debate by examining the efficiency of health facilities in Queensland using the Malmquist Productivity Index (MPI). This method is selected because it is suitable for the multi-input, multi-output, and not-for-profit natures of public health services. In addition, with the availability of panel data we can decompose productivity growth into useful components, including technical efficiency changes, technological changes and scale changes. The results revealed an average of 1.6 per cent of growth in total factor productivity (TFP) among Queensland public hospitals in the study period. The main component contributing to the modest improvement of TFP during the period was catching-up at an average of 1.0 per cent. SFA estimates suggest that the number of nurses is the most influential determinant of output.

Land leasing, land degradation and agricultural productivity in Finland

This study analysed whether the land tenure insecurity problem has led to a decline in long-term land improvements (liming and phosphorus fertilization) under the Common Agricultural Policy (CAP) and Nordic production conditions in European Union (EU) countries such as Finland. The results suggests that under traditional cash lease contracts, which are encouraged by the existing land leasing regulations and agricultural subsidy programs, the land tenure insecurity problem on leased land reduces land improvements that have a long pay-back period. In particular, soil pH was found to be significantly lower on land cultivated under a lease contract compared to land owned by the farmers themselves. The results also indicate that land improvements could not be reversed by land markets, because land owners would otherwise have carried out land improvements even if not farming by themselves. To reveal the causality between land tenure and land improvements, the dynamic optimisation problem was solved by a stochastic dynamic programming routine with known parameters for one-period returns and transition equations. The model parameters represented Finnish soil quality and production conditions. The decision rules were solved for alternative likelihood scenarios over the continuation of the fixed-term lease contract. The results suggest that as the probability of non-renewal of the lease contract increases, farmers quickly reduce investments in irreversible land improvements and, thereafter, yields gradually decline. The simulations highlighted the observed trends of a decline in land improvements on land parcels that are cultivated under lease contracts. Land tenure has resulted in the neglect of land improvement in Finland. This study aimed to analyze whether these challenges could be resolved by a tax policy that encourages land sales. Using Finnish data, real estate tax and a temporal relaxation on the taxation of capital gains showed some potential for the restructuring of land ownership. Potential sellers who could not be revealed by traditional logit models were identified with the latent class approach. Those landowners with an intention to sell even without a policy change were sensitive to temporal relaxation in the taxation of capital gains. In the long term, productivity and especially productivity growth are necessary conditions for the survival of farms and the food industry in Finland. Technical progress was found to drive the increase in productivity. The scale had only a moderate effect and for the whole study period (1976–2006) the effect was close to zero. Total factor productivity (TFP) increased, depending on the model, by 0.6–1.7% per year. The results demonstrated that the increase in productivity was hindered by the policy changes introduced in 1995. It is also evidenced that the increase in land leasing is connected to these policy changes. Land institutions and land tenure questions are essential in agricultural and rural policies on all levels, from local to international. Land ownership and land titles are commonly tied to fundamental political, economic and social questions. A fair resolution calls for innovative and new solutions both on national and international levels. However, this seems to be a problem when considering the application of EU regulations to member states inheriting divergent landownership structures and farming cultures. The contribution of this study is in describing the consequences of fitting EU agricultural policy to Finnish agricultural land tenure conditions and heritage.