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,"
Munich Reprints in Economics
20364, University of Munich, Department of Economics.
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- Usher, D, 1974.
"The Suitability of the Divisia Index for the Measurement of Economic Aggregates,"
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International Association for Research in Income and Wealth, vol. 20(3), pages 273-288, September.
- Dan Usher, 1973. "The Suitability of the Divisia Index for the Measurement of Economic Aggregates," Working Papers 109, Queen's University, Department of Economics.
- Berndt, Ernst R. & Fuss, Melvyn A., 1986. "Productivity measurement with adjustments for variations in capacity utilization and other forms of temporary equilibrium," Journal of Econometrics, Elsevier, vol. 33(1-2), pages 7-29.
- Hulten, Charles R, 1973. "Divisia Index Numbers," Econometrica, Econometric Society, vol. 41(6), pages 1017-1025, November.
- Berndt, Ernst R & Morrison, Catherine J, 1981. "Capacity Utilization Measures: Underlying Economic Theory and an Alternative Approach," American Economic Review, American Economic Association, vol. 71(2), pages 48-52, May.
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