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Measuring and analysing productivity change in a metafrontier framework

Author

Listed:
  • C. J. O’Donnell

    (The University of Queensland)

  • Saeideh Fallah-Fini

    (California State Polytechnic University)

  • Konstantinos Triantis

    (Engineering, Northern Virginia, Center)

Abstract

We consider the problem of measuring and analysing productivity change when firms have access to multiple technologies (i.e., techniques for transforming inputs into outputs). We measure productivity change using an index that satisfies a set of basic axioms from index theory (e.g., identity, proportionality, transitivity). We show how indices of this type can be exhaustively decomposed into various measures of environmental change, technical change and efficiency change. We are particularly interested in the relationship between productivity and technical efficiency. In theory, if firms have access to multiple technologies, then measures of technical efficiency can be decomposed into metatechnology ratios (measures of how well firm managers choose technologies) and measures of residual technical efficiency (measures of how well chosen technologies are used). We explain how data envelopment analysis (DEA) can be used to estimate these components. To illustrate, we use DEA to estimate the productivity gains and losses associated with using different highway maintenance technologies in Virginia.

Suggested Citation

  • C. J. O’Donnell & Saeideh Fallah-Fini & Konstantinos Triantis, 2017. "Measuring and analysing productivity change in a metafrontier framework," Journal of Productivity Analysis, Springer, vol. 47(2), pages 117-128, April.
    • Handle: RePEc:kap:jproda:v:47:y:2017:i:2:d:10.1007_s11123-017-0494-6
    DOI: 10.1007/s11123-017-0494-6
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    References listed on IDEAS

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    5. Ku-Hsieh Chen & Hao-Yen Yang, 2011. "A cross-country comparison of productivity growth using the generalised metafrontier Malmquist productivity index: with application to banking industries in Taiwan and China," Journal of Productivity Analysis, Springer, vol. 35(3), pages 197-212, June.
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    9. Yu-Ying Lin, Eugene & Chen, Ping-Yu & Chen, Chi-Chung, 2013. "Measuring green productivity of country: A generlized metafrontier Malmquist productivity index approach," Energy, Elsevier, vol. 55(C), pages 340-353.
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    Cited by:

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    2. Jin, Qianying & Kerstens, Kristiaan & Van de Woestyne, Ignace, 2020. "Metafrontier productivity indices: Questioning the common convexification strategy," European Journal of Operational Research, Elsevier, vol. 283(2), pages 737-747.
    3. María Molinos-Senante & Simon Porcher & Alexandros Maziotis, 2018. "Productivity change and its drivers for the Chilean water companies: A comparison of full private and concessionary companies," Post-Print hal-02145824, HAL.
    4. Badunenko, Oleg & D’Inverno, Giovanna & De Witte, Kristof, 2023. "On distinguishing the direct causal effect of an intervention from its efficiency-enhancing effects," European Journal of Operational Research, Elsevier, vol. 310(1), pages 432-447.
    5. Chin‐wei Huang & Hsiao‐Yin Chen, 2023. "Using nonradial metafrontier data envelopment analysis to evaluate the metatechnology and metafactor ratios for the Taiwanese hotel industry," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(4), pages 1904-1919, June.
    6. Jayanath Ananda & Dong-hyun Oh, 2023. "Assessing environmentally sensitive productivity growth: incorporating externalities and heterogeneity into water sector evaluations," Journal of Productivity Analysis, Springer, vol. 59(1), pages 45-60, February.
    7. Kerstens, Kristiaan & O’Donnell, Christopher & Van de Woestyne, Ignace, 2019. "Metatechnology frontier and convexity: A restatement," European Journal of Operational Research, Elsevier, vol. 275(2), pages 780-792.
    8. D’Inverno, Giovanna & Smet, Mike & De Witte, Kristof, 2021. "Impact evaluation in a multi-input multi-output setting: Evidence on the effect of additional resources for schools," European Journal of Operational Research, Elsevier, vol. 290(3), pages 1111-1124.
    9. Ali Homayoni & Reza Fallahnejad & Farhad Hosseinzadeh Lotfi, 2022. "Cross Malmquist Productivity Index in Data Envelopment Analysis," 4OR, Springer, vol. 20(4), pages 567-602, December.
    10. Qunwei Wang & Ye Hang & Jin‐Li Hu & Ching‐Ren Chiu, 2018. "An alternative metafrontier framework for measuring the heterogeneity of technology," Naval Research Logistics (NRL), John Wiley & Sons, vol. 65(5), pages 427-445, August.
    11. Fan, Jing-Li & Zhang, Hao & Zhang, Xian, 2020. "Unified efficiency measurement of coal-fired power plants in China considering group heterogeneity and technological gaps," Energy Economics, Elsevier, vol. 88(C).
    12. Roets, Bart & Verschelde, Marijn & Christiaens, Johan, 2018. "Multi-output efficiency and operational safety: An analysis of railway traffic control centre performance," European Journal of Operational Research, Elsevier, vol. 271(1), pages 224-237.
    13. Molinos-Senante, María & Sala-Garrido, Ramón, 2018. "Evaluation of energy performance of drinking water treatment plants: Use of energy intensity and energy efficiency metrics," Applied Energy, Elsevier, vol. 229(C), pages 1095-1102.
    14. Arora, Nitin & Talwar, Shubhendra Jit, 2020. "Modelling efficiency in budget allocations for Indian states using window based non-radial non-concave metafrontier data envelopment analysis," Socio-Economic Planning Sciences, Elsevier, vol. 70(C).
    15. Tai-Hsin Huang & Yi-Chun Lin & Kuo-Jui Huang & Yu-Wei Liao, 2022. "Comparing Cost Efficiency Between Financial and Non-financial Holding Banks and Insurers in Taiwan Under the Framework of Copula Methods and Metafrontier," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 29(4), pages 735-766, December.

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    More about this item

    Keywords

    Total factor productivity; Metatechnology ratio; Residual technical efficiency; Data envelopment analysis; Highway maintenance;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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