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On the Anatomy of Productivity Growth: A Decomposition of the Fisher Ideal TFP Index

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Author Info

  • Timo Kuosmanen

    (Wageningen University, Environmental Economics & Natural Resources Group)

  • Timo Sipiläinen

    (Agrifood Research Finland, MTT Economic Research)

Abstract

Decompositions of productivity indices contribute to our understanding of what drives the observed productivity changes by providing a detailed picture of their constituents. This paper presents the most comprehensive decomposition of total factor productivity (TFP) to date. Starting from the Fisher ideal TFP index, we systematically isolate the productivity effects of changes in production technology, technical efficiency, scale efficiency, allocative efficiency, and the market strength. The three efficiency components further decompose into input- and output-side effects. The proposed decomposition is illustrated with an empirical application to a sample of 459 Finnish farms over period 1992-2000.

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File URL: http://128.118.178.162/eps/em/papers/0410/0410010.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Econometrics with number 0410010.

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Length: 42 pages
Date of creation: 20 Oct 2004
Date of revision:
Handle: RePEc:wpa:wuwpem:0410010

Note: Type of Document - pdf; pages: 42
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Web page: http://128.118.178.162

Related research

Keywords: index numbers and aggregation; Total Factor Productivity (TFP) measurement; Fisher ideal index; Malmquist index; decompositions; agriculture;

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References

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  1. Daron Acemoglu, 2002. "Directed Technical Change," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 781-809.
  2. Fare, Rolf & Grosskopf, Shawna & Lovell, C A Knox, 1983. " The Structure of Technical Efficiency," Scandinavian Journal of Economics, Wiley Blackwell, vol. 85(2), pages 181-90.
  3. Balk, Bert M, 1993. "Malmquist Productivity Indexes and Fisher Ideal Indexes: Comment," Economic Journal, Royal Economic Society, vol. 103(418), pages 680-82, May.
  4. Basu, Susanto & Fernald, John G, 1997. "Returns to Scale in U.S. Production: Estimates and Implications," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 249-83, April.
  5. Rolf Färe & Shawna Grosskopf, 2000. "Research Note. Decomposing Technical Efficiency with Care," Management Science, INFORMS, vol. 46(1), pages 167-168, January.
  6. Diewert, Erwin, 2007. "Index Numbers," Economics working papers diewert-07-01-03-08-17-23, Vancouver School of Economics, revised 31 Jan 2007.
  7. Bjurek, Hans, 1996. " The Malmquist Total Factor Productivity Index," Scandinavian Journal of Economics, Wiley Blackwell, vol. 98(2), pages 303-13, June.
  8. Fare, Rolf & Grosskopf, Shawna, 1992. "Malmquist Productivity Indexes and Fisher Ideal Indexes," Economic Journal, Royal Economic Society, vol. 102(410), pages 158-60, January.
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Cited by:
  1. Ghelfi, Rino & Bertazzoli, Aldo & Marchi, Alan & Rivaroli, Sergio & Samoggia, Antonella, 2010. "Inputs use in the agriculture of Emilia-Romagna: farm comparison through the Total Factor Productivity (TFP) index," 120th Seminar, September 2-4, 2010, Chania, Crete 109322, European Association of Agricultural Economists.
  2. Timo Kuosmanen & Timo Sipiläinen, 2009. "Exact decomposition of the Fisher ideal total factor productivity index," Journal of Productivity Analysis, Springer, vol. 31(3), pages 137-150, June.

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