Johannes Van Biesebroeck

The Sensitivity of Productivity Estimates

Researchers interested in estimating productivity can choose from an array of methodologies, each with its strengths and weaknesses. This study compares productivity estimates and evaluates the extent to which the conclusions of three important productivity debates in the economic development literature are sensitive to the choice of estimation method. Five widely used techniques are considered, two nonparametric and three parametric: index numbers, data envelopment analysis, instrumental variables estimation, stochastic frontiers, and semiparametric estimation. Using data on manufacturing firms in two developing countries, Colombia and Zimbabwe, we find that the different methods produce surprisingly similar productivity estimates when the measures are compared directly, even though the estimated input elasticities vary widely. Furthermore, the methods reach the same conclusions on two of the debates, supporting endogenous growth effects and showing that firm-level productivity changes are an important c...Researchers interested in estimating productivity can choose from an array of methodologies, each with its strengths and weaknesses. This study compares productivity estimates and evaluates the extent to which the conclusions of three important productivity debates in the economic development literature are sensitive to the choice of estimation method. Five widely used techniques are considered, two nonparametric and three parametric: index numbers, data envelopment analysis, instrumental variables estimation, stochastic frontiers, and semiparametric estimation. Using data on manufacturing firms in two developing countries, Colombia and Zimbabwe, we find that the different methods produce surprisingly similar productivity estimates when the measures are compared directly, even though the estimated input elasticities vary widely. Furthermore, the methods reach the same conclusions on two of the debates, supporting endogenous growth effects and showing that firm-level productivity changes are an important contributor to aggregate productivity growth. On the third debate, only with the parametric productivity measures is there evidence of learning by exporting.

Globalisation of the automotive industry: main features and trends

This paper lays out the main features of the global automotive industry and identifies several important trends. A boom in developing country sales and production has not yet overshadowed the importance of existing markets in developed regions. Regional integration is very strong at an operational level, yet the industry has recently developed a set of global-scale value chain linkages, and retains national and local elements as well. The paper highlights how global, regional, national and local value chains are nested to create a pattern of global integration that is distinctive to the industry. We use global value chain analysis to help explain the limits of build-to-order in the industry, the role of regional and global suppliers, the shifting geography of production and how the characteristics of value chain linkages in the industry favour tight integration and regional production. We describe how industry concentration focuses power in the hands of a few large lead firms and discuss the implications of this for value chain governance and the geography of production.

Trade Growth Under the African Growth and Opportunity Act

This paper investigates whether one of the most important U.S. policies toward Africa of the past few decades achieved its desired result. In 2000, the United States dropped trade restrictions on a broad list of products through the African Growth and Opportunity Act (AGOA). Since the act was applied selectively to both countries and products, we can estimate the impact with a triple difference-in-differences estimation, controlling for both country and product-level import surges at the time of onset. This approach allows us to better address the endogeneity-of-policy critique of standard difference-in-differences estimation than if either a country- or a product-level analysis was performed separately. Despite the fact that the AGOA product list was chosen to not include import-sensitive products and despite the general challenges of transaction costs in African countries, we find that AGOA had a large and robust impact on apparel imports into the United States, as well as on the agricultural and manufactured products covered by AGOA. These import responses grew over time and were the largest in product categories where the tariffs removed were large. AGOA did not result in a decrease in exports to Europe in these product categories, suggesting that the AGOA exports were not merely diverted from other destinations. We discuss how the effects vary across countries and the implications of these findings for aggregate export volumes.

Productivity dynamics with technology choice: An application to automobile assembly

During the 1980s, all Japanese automobile producers opened assembly plants in North America. Industry analysts and previous research claim that these transplants are more productive than incumbent plants and that they produce with a substantially different production process. I compare the production processes by estimating a model that allows for heterogeneity in technology and productivity, both of which are intrinsically unobservable. The model is estimated on a panel of assembly plants, controlling for capacity utilization and price effects.The results indicate that the more recent technology uses capital more intensively and it has a higher elasticity of substitution between labour and capital. Hicks-neutral productivity growth is estimated to be lower, while capital-biased (labour-saving) productivity growth is higher for the new technology. Using the estimation results, I decompose industry-wide productivity growth and find plant-level changes in lean plants to be the most important contributor. Plant-level productivity growth is further decomposed to reveal the importance of capital-biased productivity growth, increases in the capital-labour ratio, and returns to scale. Copyright 2003, Wiley-Blackwell.

Effects of the Crisis on the Automotive Industry in Developing Countries: A Global Value Chain Perspective

This paper applies global value chain analysis to study recent trends in the global automotive industry. The authors pay special attention to the effects of the recent economic crisis on the industry in developing countries. The principal finding is that the crisis has accelerated pre-crisis trends toward greater importance of the industry in the South. More rapid growth of car ownership is the impetus, but the co-location and close interaction of suppliers and lead firms in this industry is an important catalyst. Opportunities to move up in the value chain for suppliers in emerging economies have proliferated and are likely to become even stronger now that an increasing number of new models are developed specifically for markets in developing countries. The co-location of assembly and parts plants in national and regional production systems has largely confined the impact of sales declines during the crisis to each country/region. In addition, the different development strategies followed by countries like Mexico, China, and India are slowly converging as their industries gain size and independence.

Global value chains in the automotive industry: an enhanced role for developing countries?

In this paper, we apply global value chain (GVC) analysis to recent trends in the global automotive industry. We focus on how the recent economic crisis has accelerated pre-crisis trends towards greater importance of the industry in the developing world. The regional structure of production in the industry has largely confined the impact of the crisis within each major producing country/region. Opportunities to move up in the value chain for suppliers in emerging economies have proliferated and are likely to become even stronger now that an increasing number of new models are developed specifically for local markets. While it appears that some large developing countries, especially China and India, are gradually gaining more independence and autonomy as their industries and markets gain size and importance, supplier countries such as Mexico and countries in East Europe remain as dependent appendages of adjacent regional production systems.

The cost of flexibility

Purpose – In the automobile industry, the variety of vehicles produced continues to increase. At the same time, historically firms have incurred a sizeable productivity penalty for producing more variety in their plants. The purpose of this paper is to answer the question: what actions have firms taken to control this productivity penalty and what were the costs?Design/methodology/approach – Estimate a number of statistical models of the effect of variety on productivity for a sample that includes almost all assembly plants in North America from 1994 to 2004.Findings – Evidence is found for fixed costs associated with activities that are complementary to producing variety and for a trade‐off between scale economies and flexibility.Research limitations/implications – Provides evidence that while flexibility has an advantage to cope with increasing variety, there are non‐negligible costs as well.Originality/value – A first systematic evaluation on the scale‐scope trade‐off and a quantification of the gains ...

The Impact of Trade Promotion Services on Canadian Exporter Performance

We evaluate the impact of the export promotion program delivered by the Canadian Trade Commissioner Service on various dimensions of export performance. Over the 1999-2006 time period we study, Canadian firms successfully diversified their exports to destinations beyond the United States and smaller firms increased their share of total exports. Both of these achievements are explicit aims of the program, but in order to make causal inferences we rely on various identifying assumptions from the treatment effects literature. The results indicate very robustly that the program had an effect at the intensive margin, boosting the average level of exports to given product-destination markets. Effects at the extensive margins of trade, increasing the number of export destinations or number of products exported, are smaller and more sensitive to the identification assumption. This finding differs from previous studies for several Latin American countries where extensive margin effects were most robust. One reason is that the Canadian program was most effective for larger firms and for firms already active on several export markets.

Effects of Deregulation and Vertical Unbundling on the Performance of China's Electricity Generation Sector

The restructuring of the Chinese electricity sector in 2002 reshaped the market structure by vertically unbundling the dominant integrated firm and started the process of wholesale price liberalization. We estimate factor demands to study whether these reforms boosted productivity in the generation segment of the industry. Controlling explicitly for price‐heterogeneity across firms and unobservable productivity shocks, we find that the reforms are associated with reductions in labor and material use of 7 and 5 per cent, respectively. These effects only appear two years after the reforms and are robust to many specification checks. The absolute magnitudes of the estimated restructuring effects vary in intuitive ways by location, firm size or age, and for different definitions of restructured firms.

The Relationship between Market Structure and Innovation in Industry Equilibrium: A Case Study of the Global Automobile Industry

We first estimate a dynamic game for the global automobile industry and then compute a Markov Perfect equilibrium to study the equilibrium relationship between market structure and innovation. The key state variable in the model is the efficiency level of each firm and the market structure is characterized by the vector of efficiency levels across all firms. Efficiency is estimated to be stochastically increasing in the dynamic control-innovation-which is proxied by patenting behavior. Equilibrium innovation is a function of all state variables in the industry and the cost of RD 2) innovation is decreasing in the efficiency dispersion; 3) innovation is more concentrated that efficiency; 4) innovation is declining in the number of active firms; 5) the innovation gap between the leader and other firms increases with competition.