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Malmquist and Törnqvist Productivity Indexes: Returns to Scale and Technical Progress with Imperfect Competition

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  • Diewert, Erwin
  • Fox, Kevin J.

Abstract

Caves, Christensen and Diewert proposed a method for estimating a theoretical productivity index for a firm using Törnqvist input and output indexes, augmented by exogenous estimates of local returns to scale. However, in order to implement their method, they assumed that the firm maximized revenue in each period, conditional on the observed input vector in each period, taking output prices as fixed. This assumption is not warranted when there are increasing returns to scale. Thus in the present paper, it is assumed that the firm solves a monopolistic profit maximization problem when there are increasing returns to scale and the results of Caves, Christensen and Diewert are modified in accordance with this assumption.

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File URL: http://faculty.arts.ubc.ca/ediewert/dp1003.pdf
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Bibliographic Info

Paper provided by Vancouver School of Economics in its series Economics working papers with number erwin_diewert-2010-5.

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Length: 24 pages
Date of creation: 17 Feb 2010
Date of revision: 13 Jul 2010
Handle: RePEc:ubc:bricol:erwin_diewert-2010-5

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Web page: http://www.economics.ubc.ca/

Related research

Keywords: Productivity; index numbers; Malmquist indexes; Törnqvist indexes; returns to scale; non-competitive behavior; flexible functional forms.;

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Cited by:
  1. Guohua Feng & Apostolos Serletis, 2010. "A Primal Divisia Technical Change Index Based on the Output Distance Function," Monash Econometrics and Business Statistics Working Papers 7/10, Monash University, Department of Econometrics and Business Statistics.
  2. Carlo Milana & Leopoldo Nascia & Alessandro Zeli, 2013. "Decomposing multifactor productivity in Italy from 1998 to 2004: evidence from large firms and SMEs using DEA," Journal of Productivity Analysis, Springer, vol. 40(1), pages 99-109, August.
  3. Merino, Fernando, 2012. "Firms' internationalization and productivity growth," Research in Economics, Elsevier, vol. 66(4), pages 349-354.
  4. W. Erwin Diewert & Kevin J. Fox, 2014. "Decomposing Bjurek Productivity Indexes into Explanatory Factors," Discussion Papers 2014-33, School of Economics, The University of New South Wales.

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