Oleg Badunenko

Technological Change and Transition: Relative Contributions to Worldwide Growth During the 1990s

In this paper we used the procedures developed in the Kumar and Russell (2002) growth-accounting study to examine cross-country growth during the 1990s. Using a data set comprising developed, newly industrialized, developing and transitional economies, we decomposed the growth of output per worker into components attributable to technological catch-up, technological change and capital accumulation. In contrast to the study by Kumar and Russell (2002), which concluded that capital deepening was the major force of growth and change in the world income per worker distribution over the 1965-1990 period, our analysis showed that, during the 1990s, the major force in the further divergence of the rich and the poor was due to technological change, whereas capital accumulation played a lesser and opposite role. In further contrast, we found that efficiency changes (insignificantly) led (on average) to regress rather than progress. Finally, although on average we found that transitional economies performed similar to the rest of the world, the procedure was able to discover some interesting patterns within the set of transitional countries.

FINANCIAL DEVELOPMENT AND THE SOURCES OF GROWTH AND CONVERGENCE

We extend the deterministic, nonparametric production frontier framework by incorporating financial development. Our analysis convincingly shows that (1) failure to account for financial development overstates the role of physical capital accumulation in labor productivity growth, (2) most of this overstated contribution stems from the efficiency‐enhancing role of well‐functioning financial institutions, (3) international polarization is solely driven by efficiency changes, and (4) increased distributional dispersion of productivity is primarily driven by technological change. Model’s extensions to account for the growth effect of changes in the institutional environment only add to the argument about the overstated role of physical capital.

What Drives the Productive Efficiency of a Firm? The Importance of Industry, Location, R&D, and Size

This paper investigates the factors that explain the level and dynamics of manufacturing firm productive efficiency. In our empirical analysis, we use a unique sample of about 39,000 firms in 256 industries from the German Cost Structure Census over the years 1992-2005. We estimate the efficiencies of the firms and relate them to firm-specific and environmental factors. We find that (1) about half the models explanatory power is due to industry effects, (2) firm size accounts for another 20 percent, and (3) location of headquarters explains approximately 15 percent. Interestingly, most other firm characteristics, such as R&D intensity, outsourcing activities, or the number of owners, have extremely little explanatory power. Surprisingly, our findings suggest that higher R&D intensity is associated with being less efficient, though higher R&D spending increases a firms efficiency over time.

Economies of scale, technical change and persistent and time-varying cost efficiency in Indian banking: do ownership, regulation and heterogeneity matter?

Banks with different ownership types adjust differently to changes in regulatory environments. Although this topic has been widely studied, all the previous studies fail to control for bank-heterogeneity (bank-specific effects) in estimating cost structure and efficiency. We propose a model where we control for bank-heterogeneity, and introduce persistent and time-varying inefficiency. Additionally we incorporate determinants of both persistent and time-varying inefficiency as well as production risks. Furthermore, our model allows estimation of different technologies for different ownership types jointly. We use this model to analyze the effect of regulation in Indian banking. We find that private banks have not exhausted their economies of scale, foreign banks are operating under diseconomies of scale, especially after the reforms, and scale economies of state owned banks are unaffected by regulation. Banks of all ownership types have enjoyed technical progress; however, foreign banks have benefited the most, followed by state owned banks. Only state banks were able to improve their cost efficiency, while private banks, and especially foreign banks, were lagging behind their cost frontiers.

When, where and how to estimate persistent and transient efficiency in stochastic frontier panel data models

In this paper we examine robustness of a recently developed panel data stochastic frontier model that allows for both persistent and transient (also known as long-run and short-run or time-invariant and time-varying) inefficiency along with random firm-effects (heterogeneity) and noise. We address some concerns that the practitioners might have about this model. First, given that there are two random time-invariant components (persistent inefficiency and firm-effects) the concern is whether the model can accurately identify them, and if so how precisely can the model estimate them? Second, there are two time-varying random components (transient inefficiency and noise), and the concern is whether the model can separate noise from transient inefficiency, and if so how precisely can the model estimate transient inefficiency? Third, how well are persistent and transient inefficiency estimated under different scenarios, viz., under different configurations of the variance parameters of the four random components? Given that the model is quite complex, relatively new and becoming quite popular in the panel efficiency literature, we feel that there is need for a detailed simulation study to examine when, where and how one can use this model with confidence to estimate persistent and transient inefficiency.

Productivity Growth across Spanish Regions and Industries: A Production-Frontier Approach

Badunenko O. and Romero-Ávila D. Productivity growth across Spanish regions and industries: a production-frontier approach, Regional Studies. This paper decomposes labour productivity growth into components attributable to technological change, technological catch-up, capital deepening and human capital accumulation. This is done through a production-frontier approach applied to Spanish data disaggregated along regional and sectoral dimensions. It is shown that capital deepening is the primary contributor to productivity growth, closely followed by human capital and technological change; widespread efficiency losses substantially impede productivity growth; productivity convergence is driven by higher efficiency losses exhibited by rich regions; analysis of sectoral data shows marked differences in productivity performance; and aggregate productivity growth is driven by intra-sectoral productivity dynamics rather than by structural change.

Soaring dragons, roaring tigers, growling bears

We perform a comparative analysis of regional growth and convergence in China, Russia and India over the period 1993–2003 by means of non-parametric methods and kernel density estimates. Our results indicate that wealthy regions were largely responsible for the rapid growth in all three countries. For China and India, capital dissipation was identified as the major determinant of regional growth. In Russia, capital deepening impeded positive changes in labour productivity, leaving technological change as the only source of regional growth. Furthermore, we find that the increasing regional income inequality in all three countries was driven by technological change which more than offset the convergence resulting from capital deepening in China and India.

Explaining African Growth Performance: A Production-Frontier Approach

This paper employs a production frontier approach that allows distinguishing technologic progress from efficiency development. Data on 35 African countries in 1970-2007 show that efficiency losses have constrained growth in Africa while technology progress has played a marginal growth enhancing role in the region. Moreover, physical and human capital accumulation are the main factors that drive productivity growth at the country level. Examining the outcomes of successful countries suggests that good governance, institutional quality and good policies are key factors for improving economic development in Africa. These factors are even more required in Sub-Saharan Africa given the natural constraints of geography in the region.

Does the Tenure of Private Equity Investment Improve the Performance of European Firms

The paper investigates whether the presence and tenure of Private Equity (PE) investment in European companies improves their performance. Previous studies documented the unambiguous merit of a buyout during the 1980s and 1990s for listed firms in the US and UK markets. This study analyzes such influences in both listed and unlisted European firms during 2002-2007. Our analysis suggests that short-term PE investments have, on average, a detrimental effect on firm performance. The performance of a firm that has PE backing is lower than that of a firm without PE backing in the first year of PE investment. Such an effect disappears if PE investments remain in the firm for an uninterrupted six-year term.

Are private equity investors good or evil

The paper investigates the motives of activity (entry and exit) of Private Equity (PE) investors in European companies. Investment of a PE firm is not viewed unambiguously. First, it is claimed that PE investment is made for the sake of seeking short-term gains by taking control and utilizing the companys resources. Second, a PE firm invests because of prior identification of chances to add value to the company. We attempt to resolve these two conflicting conjectures. We use the Bureau van Dijks Amadeus database of very large, large and medium-sized European companies. Our major results can be summarized as follows. First, PE firms are less willing to enter the firm if there is already a blocking majority, and they are more likely to leave the firm if control cannot be overtaken. Second, less mature firms are less able to lure a PE firm to invest, thus indicating a safe strategy of PE investors. Third, we do not find empirical evidence that a PE investor comes in to strip a firm of its equity. On the other hand, PE investors are likely to leave the company if it deteriorates in terms of returns and cash. Finally, when comparing the activity of PE and other financial investors, we find essential differences in choosing the field and environment of activity.