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A proposal for decomposing and adjusting the conventional Divisia index for the measure of productivity

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  • Rodriguez, X.A.

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Abstract

This paper proposes a general framework for decomposing (without incorporating restrictive assumptions) the conventional Divisia index of productivity into for types of effects: technological, subequilibrium, scale, and so -called "market" effects or mark-ups. We believe, however, that this last component is due to a "defect" in the aggregation of the productions in the Divisia index itself, in situations where the conditions of long-run competitive equilibrium are not meet in the product markets. Therefore we adjust the index and conclude with a decomposition equation (with technical subequilibrium and scale effects) which is flexible and generic. Use of the framework is illustrated empirical for the Spanish energy mining sector.

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Bibliographic Info

Paper provided by University of Santiago de Compostela. Faculty of Economics and Business. Econometrics. in its series Economic Development with number 41.

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Length: 27 pages
Date of creation: 1999
Date of revision:
Handle: RePEc:eaa:ecodev:41

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Keywords: the Divisia index; total factor productivity;

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  1. Flaig, Gebhard & Steiner, Viktor, 1993. "Searching for the "Productivity Slowdown": Some Surprising Findings from West German Manufacturing," The Review of Economics and Statistics, MIT Press, vol. 75(1), pages 57-65, February.
  2. Diewert, W E, 1971. "An Application of the Shephard Duality Theorem: A Generalized Leontief Production Function," Journal of Political Economy, University of Chicago Press, vol. 79(3), pages 481-507, May-June.
  3. Berndt, Ernst R & Morrison, Catherine J, 1981. "Capacity Utilization Measures: Underlying Economic Theory and an Alternative Approach," American Economic Review, American Economic Association, vol. 71(2), pages 48-52, May.
  4. Usher, D, 1974. "The Suitability of the Divisia Index for the Measurement of Economic Aggregates," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 20(3), pages 273-88, September.
  5. Berndt, Ernst R. & Fuss, Melvyn A., 1986. "Productivity measurement with adjustments for variations in capacity utilization and other forms of temporary equilibrium," Journal of Econometrics, Elsevier, vol. 33(1-2), pages 7-29.
  6. Hulten, Charles R, 1973. "Divisia Index Numbers," Econometrica, Econometric Society, vol. 41(6), pages 1017-25, November.
  7. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
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