A proposal for decomposing and adjusting the conventional Divisia index for the measure of productivity
This paper proposes a general framework for decomposing (without incorporating restrictive assumptions) the conventional Divisia index of productivity into for types of effects: technological, subequilibrium, scale, and so -called "market" effects or mark-ups. We believe, however, that this last component is due to a "defect" in the aggregation of the productions in the Divisia index itself, in situations where the conditions of long-run competitive equilibrium are not meet in the product markets. Therefore we adjust the index and conclude with a decomposition equation (with technical subequilibrium and scale effects) which is flexible and generic. Use of the framework is illustrated empirical for the Spanish energy mining sector.
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- Flaig, Gebhard & Steiner, Viktor, 1993.
"Searching for the "Productivity Slowdown": Some Surprising Findings from West German Manufacturing,"
The Review of Economics and Statistics,
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- Dan Usher, 1973.
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109, Queen's University, Department of Economics.
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- Hulten, Charles R, 1973. "Divisia Index Numbers," Econometrica, Econometric Society, vol. 41(6), pages 1017-25, November.
- Diewert, W E, 1971. "An Application of the Shephard Duality Theorem: A Generalized Leontief Production Function," Journal of Political Economy, University of Chicago Press, vol. 79(3), pages 481-507, May-June.
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