A note on the choice of Malmquist productivity index and Malmquist total factor productivity index

Halkos, George and Tzeremes, Nickolaos (2006): A note on the choice of Malmquist productivity index and Malmquist total factor productivity index.

Abstract

This paper by analyzing the two popular methodologies of productivity measurement provides an example that illustrates the differences when adopting the two methodologies. Furthermore, under the restriction of constant returns to scale raises some methodological issues regarding the theory of productivity measurement using the Malmquist Productivity Index and Malmquist Total Factor Productivity Index. Furthermore by using an illustrative example under the restriction of constant returns to scale the study indicates that the two indexes produce similar results. However, the differences observed are determining the choice of the methodology adopted when measuring productivity.

• Item Type: MPRA Paper
• Language: English
• Keywords: Productivity measurement; Malmquist Productivity Index; Malmquist Total Factor Productivity Index
• Subjects: C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C69 - Other; D - Microeconomics > D2 - Production and Organizations > D24 - Production ; Cost ; Capital ; Capital, Total Factor, and Multifactor Productivity ; Capacity; I - Health, Education, and Welfare > I1 - Health > I10 - General

References

[1] M.M. Yu, The capacity productivity change and the variable input productivity change: a new decomposition of the Malmquist productivity index, Appl. Math. Comput. 185 (1) (2007) 375-381.

[2] C.A.K. Lovell, The decomposition of Malmquist productivity index, J. Product. Anal. 20 (3) (2003) 437-458.

[3] D.W. Caves, L.R. Christensen, W.E. Diewert, The economic theory of index numbers and the measurement of input, output and productivity. Econometr. 50 (1982) 1393–1414.

[4] H. Bjurek, The Malmquist Total Factor Productivity Index, Scand. J. of Econ., 98 (2) (1996) 303-313.

[5] R.W. Shephard, Theory of Cost and Production Function. Princenton University Press, Princeton, NJ, (1970).

[6] R. Färe, S. Grosskoff, B. Lindgren, P. Roos, Productiviity changes in Swedish Pharmacies 1980-89: A Nonparametric Malmquist Approach, J. of Product. Anal., 3 (3) (1992) 85-101.

[7] R. Färe, S. Grosskoff, P. Roos, On two definitions of productivity, Econ. Lett., 53 (1996) 269-274.

[8] ICAP Greece in figures, Greek Financial Directory. ICAP, Greece, (1996). Available at: www.finacial-directory.gr.

[9] D.K. Lambert, Scale and Malmquist productivity index, Appl. Econ. Lett., 6 (1999) 593-596.