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Shadow Price Approach to Total Factor Productivity Measurement: With an Application to Finnish Grass-Silage Production

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  • Timo Kuosmanen

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  • Thierry Post

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  • Timo Sipiläinen

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Abstract

This paper explores an intermediate route between the Fisher and the Malmquist productivity indexes so as to minimize data requirements and assumptions about economic behavior of production units and their production technology. Assuming quantity data of inputs and outputs and the behavioral hypothesis of allocative efficiency, we calculate the exact value of the Fisher ideal productivity index using implicit shadow prices revealed by the choice of input–output mix. The approach is operationalized by means of a nonparametric data envelopment analysis (DEA) model. Empirical application to Finnish grass silage farms suggests that the Malmquist and the Fisher productivity indices yield similar results when averaged over firms, but there can be major differences in the results of the two approaches at the level of individual firms. Copyright Kluwer Academic Publishers 2004

Suggested Citation

  • Timo Kuosmanen & Thierry Post & Timo Sipiläinen, 2004. "Shadow Price Approach to Total Factor Productivity Measurement: With an Application to Finnish Grass-Silage Production," Journal of Productivity Analysis, Springer, vol. 22(1), pages 95-121, July.
  • Handle: RePEc:kap:jproda:v:22:y:2004:i:1:p:95-121
    DOI: 10.1023/B:PROD.0000034693.38576.94
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    File URL: http://hdl.handle.net/10.1023/B:PROD.0000034693.38576.94
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    References listed on IDEAS

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    1. Timo Kuosmanen, 2003. "Duality Theory of Non-convex Technologies," Journal of Productivity Analysis, Springer, vol. 20(3), pages 273-304, November.
    2. Ray, Subhash C & Desli, Evangelia, 1997. "Productivity Growth, Technical Progress, and Efficiency Change in Industrialized Countries: Comment," American Economic Review, American Economic Association, vol. 87(5), pages 1033-1039, December.
    3. Cherchye, Laurens & Kuosmanen, Timo & Post, Thierry, 2002. "Non-parametric production analysis in non-competitive environments," International Journal of Production Economics, Elsevier, vol. 80(3), pages 279-294, December.
    4. Laurens Cherchye & Timo Kuosmanen & Thierry Post, 2000. "What Is the Economic Meaning of FDH? A Reply to Thrall," Journal of Productivity Analysis, Springer, vol. 13(3), pages 263-267, May.
    5. Timo Kuosmanen & Thierry Post, 2002. "Nonparametric Efficiency Analysis under Price Uncertainty: A First-Order Stochastic Dominance Approach," Journal of Productivity Analysis, Springer, vol. 17(3), pages 183-200, May.
    6. Oulton,Nicholas & O'Mahony,Mary, 1994. "Productivity and Growth," Cambridge Books, Cambridge University Press, number 9780521453455, August.
    7. Kuosmanen, Timo & Post, Thierry, 2001. "Measuring economic efficiency with incomplete price information: With an application to European commercial banks," European Journal of Operational Research, Elsevier, vol. 134(1), pages 43-58, October.
    8. Marcel Boumans, 2001. "Fisher's Instrumental Approach to Index Numbers," History of Political Economy, Duke University Press, vol. 33(5), pages 313-344, Supplemen.
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    Citations

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    Cited by:

    1. Breisinger, Clemens & van Rheenen, Teunis & Ringler, Claudia & Nin Pratt, Alejandro & Minot, Nicholas & Aragon, Catherine & Yu, Bingxin & Ecker, Olivier & Zhu, Tingju, 2010. "Food security and economic development in the Middle East and North Africa," IFPRI discussion papers 985, International Food Policy Research Institute (IFPRI).
    2. Yu SHENG & Yanrui WU & Xunpeng SHI & Dandan ZHANG, 2014. "Markket Integration and Energy Trade Efficiency: An Application of Malmqvist Index to Analyse Multi-Product Trade," Working Papers DP-2014-20, Economic Research Institute for ASEAN and East Asia (ERIA).
    3. Nin Pratt, Alejandro & Yu, Bingxin, 2008. "An updated look at the recovery of agricultural productivity in Sub-Saharan Africa:," IFPRI discussion papers 787, International Food Policy Research Institute (IFPRI).
    4. repec:era:chaptr:2013-rpr-29-06 is not listed on IDEAS
    5. Eskelinen, Juha & Kuosmanen, Timo, 2013. "Intertemporal efficiency analysis of sales teams of a bank: Stochastic semi-nonparametric approach," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 5163-5175.
    6. Alejandro Nin-Pratt & Bingxin Yu, 2010. "Getting implicit shadow prices right for the estimation of the Malmquist index: the case of agricultural total factor productivity in developing countries," Agricultural Economics, International Association of Agricultural Economists, vol. 41(3-4), pages 349-360, May.
    7. Alejandro Nin-Pratt & Bingxin Yu & Shenggen Fan, 2010. "Comparisons of agricultural productivity growth in China and India," Journal of Productivity Analysis, Springer, vol. 33(3), pages 209-223, June.
    8. Yu, Bingxin & Nin Pratt, Alejandro, 2011. "Agricultural Productivity and Policies in Sub-Saharan Africa," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 105400, Agricultural and Applied Economics Association.
    9. 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.
    10. Mika Kortelainen & Timo Kuosmanen, 2004. "Measuring Eco-efficiency of Production: A Frontier Approach," Econometrics 0411006, University Library of Munich, Germany.

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