Profits and Productivity
AbstractIn this study we consider the linkage between productivity change and profit change. We develop an analytical framework in which profit change between one period and the next is decomposed into three sources: (i) a productivity change effect (which includes a technical change effect and an operating efficiency effect), (ii) an activity effect (which includes a product mix effect, a resource mix effect, and a scale effect), and (iii) a price effect. We then show how to quantify the contribution of each effect, using only observed prices and quantities of products and resources in the two periods. We illustrate our analytical decomposition of profit change with an empirical application to Spanish banking during the period 1987--1994.
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Bibliographic InfoArticle provided by INFORMS in its journal Management Science.
Volume (Year): 45 (1999)
Issue (Month): 9 (September)
profits; productivity; banking;
Other versions of this item:
- D2 - Microeconomics - - Production and Organizations
- G2 - Financial Economics - - Financial Institutions and Services
- O3 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights
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- R. D. Banker & A. Charnes & W. W. Cooper, 1984. "Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis," Management Science, INFORMS, vol. 30(9), pages 1078-1092, September.
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- Garrigosa, E Genescá & Tatjé, E Grifell, 1992. "Profits and total factor productivity: A comparative analysis," Omega, Elsevier, vol. 20(5-6), pages 553-568.
- Forsund, F.R., 1990. "The Malmquist Productivity Index," Memorandum 28/1990, Oslo University, Department of Economics.
- Eldor, Dan & Sudit, Ephraim F, 1981. "Productivity-based financial net income analysis," Omega, Elsevier, vol. 9(6), pages 605-611.
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