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The Many Decompositions of Total Factor Productivity Change

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  • Balk, B.M.
  • Zofío, J.L.

Abstract

Total factor productivity change, here defined as output quantity change di- vided by input quantity change, is the combined result of (technical) efficiency change, technological change, a scale effect, and input and output mix ef- fects. Sometimes allocative efficiency change is supposed to also play a role. Given a certain functional form for the productivity index, the problem is how to decompose such an index into factors corresponding to these five or six components. A basic insight offered in the present paper is that mean- ingful decompositions of productivity indices can only be obtained for indices which are transitive in the main variables. Using a unified approach, we ob- tain decompositions for Malmquist, Moorsteen-Bjurek, price-weighted, and share-weighted productivity indices. A unique feature of this paper is that all the decompositions are applied to the same dataset of a real-life panel of decision-making units so that the extent of the differences between the various decompositions can be judged.

Suggested Citation

  • Balk, B.M. & Zofío, J.L., 2018. "The Many Decompositions of Total Factor Productivity Change," ERIM Report Series Research in Management ERS-2018-003-LIS, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
  • Handle: RePEc:ems:eureri:104721
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    References listed on IDEAS

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    6. Nikolaos Maniadakis & Emmanuel Thanassoulis, 2000. "Assessing productivity changes in UK hospitals reflecting technology and input prices," Applied Economics, Taylor & Francis Journals, vol. 32(12), pages 1575-1589.
    7. Balk, B.M. & Barbero, J. & Zofío, J.L., 2018. "A Total Factor Productivity Toolbox for MATLAB," ERIM Report Series Research in Management ERS-2018-004-LIS, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    8. Balk,Bert M., 2012. "Price and Quantity Index Numbers," Cambridge Books, Cambridge University Press, number 9781107404960, November.
    9. 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.
    10. Aparicio, Juan & Pastor, Jesus T. & Zofio, Jose L., 2015. "How to properly decompose economic efficiency using technical and allocative criteria with non-homothetic DEA technologies," European Journal of Operational Research, Elsevier, vol. 240(3), pages 882-891.
    11. Epure, Mircea & Kerstens, Kristiaan & Prior, Diego, 2011. "Technology-based total factor productivity and benchmarking: New proposals and an application," Omega, Elsevier, vol. 39(6), pages 608-619, December.
    12. Thanassoulis, Emmanuel & Shiraz, Rashed Khanjani & Maniadakis, Nikolaos, 2015. "A cost Malmquist productivity index capturing group performance," European Journal of Operational Research, Elsevier, vol. 241(3), pages 796-805.
    13. Gerald Granderson & Diego Prior, 2013. "Environmental externalities and regulation constrained cost productivity growth in the US electric utility industry," Journal of Productivity Analysis, Springer, vol. 39(3), pages 243-257, June.
    14. R. Robert Russell & William Schworm, 2018. "Technological inefficiency indexes: a binary taxonomy and a generic theorem," Journal of Productivity Analysis, Springer, vol. 49(1), pages 17-23, February.
    15. Barnabé Walheer, 2018. "Cost Malmquist productivity index: an output-specific approach for group comparison," Journal of Productivity Analysis, Springer, vol. 49(1), pages 79-94, February.
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    Cited by:

    1. Christos Pantzios & Giannis Karagiannis & Vangelis Tzouvelekas, 2011. "Parametric decomposition of the input-oriented Malmquist productivity index: with an application to Greek aquaculture," Journal of Productivity Analysis, Springer, vol. 36(1), pages 21-31, August.
    2. Rolf Färe & Valentin Zelenyuk, 2021. "On aggregation of multi-factor productivity indexes," Journal of Productivity Analysis, Springer, vol. 55(2), pages 107-133, April.
    3. Bert M. Balk, 2007. "Measuring Productivity Change without Neoclassical Assumptions: A Conceptual Analysis," CEPA Working Papers Series WP042007, School of Economics, University of Queensland, Australia.
    4. Rolf Färe & Valentin Zelenyuk, 2020. "POn Fisher Aggregation of Multi-factor Productivity Indexes," CEPA Working Papers Series WP082020, School of Economics, University of Queensland, Australia.

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    More about this item

    Keywords

    total factor productivity; index; decomposition; Malmquist; Moorsteen; Bjurek; Fisher; Törnqvist;
    All these keywords.

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

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