On the circularity of the Malmquist productivity index
AbstractCircularity is a desirable property of a productivity index seldom satisfied in available bilateral indices, such as the Malmquist index. Within a setting of micro units belonging to groups with group-specific frontier technology, the bilateral Malmquist productivity index is investigated. Our setting can be interpreted as representing cross section data, but also cross section, time series by identifying groups as time periods. A general proposition giving the condition for the Malmquist index to be circular is presented. When the condition is not met, ways of making the index transitive are explored. Four strategies adopted from the literature is followed; using one group as base, taking an average over possible bases, developing a multilateral index, and chain-linking. An expression of the Malmquist multilateral index is developed giving the difference between the Malmquist bilateral- and multilateral indexes.
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Bibliographic InfoPaper provided by ICER - International Centre for Economic Research in its series ICER Working Papers with number 29-2002.
Length: 34 pages
Date of creation: Jun 2002
Date of revision:
Circularity; transitivity; Malmquist productivity index; multilateral index; chain-linking;
Find related papers by JEL classification:
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
This paper has been announced in the following NEP Reports:
- NEP-EFF-2003-07-29 (Efficiency & Productivity)
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