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Malmquist and Törnqvist Productivity Indexes: Returns to Scale and Technical Progress with Imperfect Competition

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  • Diewert, Erwin
  • Fox, Kevin J.

Abstract

Caves, Christensen and Diewert proposed a method for estimating a theoretical productivity index for a firm using Törnqvist input and output indexes, augmented by exogenous estimates of local returns to scale. However, in order to implement their method, they assumed that the firm maximized revenue in each period, conditional on the observed input vector in each period, taking output prices as fixed. This assumption is not warranted when there are increasing returns to scale. Thus in the present paper, it is assumed that the firm solves a monopolistic profit maximization problem when there are increasing returns to scale and the results of Caves, Christensen and Diewert are modified in accordance with this assumption.

Suggested Citation

  • Diewert, Erwin & Fox, Kevin J., 2010. "Malmquist and Törnqvist Productivity Indexes: Returns to Scale and Technical Progress with Imperfect Competition," Economics working papers erwin_diewert-2010-5, Vancouver School of Economics, revised 13 Jul 2010.
  • Handle: RePEc:ubc:bricol:erwin_diewert-2010-5
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    File URL: http://faculty.arts.ubc.ca/ediewert/dp1003.pdf
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    Citations

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    Cited by:

    1. Carlo Milana & Leopoldo Nascia & Alessandro Zeli, 2013. "Decomposing multifactor productivity in Italy from 1998 to 2004: evidence from large firms and SMEs using DEA," Journal of Productivity Analysis, Springer, vol. 40(1), pages 99-109, August.
    2. Diewert, W. Erwin & Fox, Kevin J., 2017. "Decomposing productivity indexes into explanatory factors," European Journal of Operational Research, Elsevier, vol. 256(1), pages 275-291.
    3. Feng, Guohua & Serletis, Apostolos, 2010. "A primal Divisia technical change index based on the output distance function," Journal of Econometrics, Elsevier, vol. 159(2), pages 320-330, December.
    4. Diewert, Erwin & Fox, Kevin J., 2014. "Decomposing Bjurek Productivity Indexes into Explanatory Factors," Economics working papers erwin_diewert-2014-32, Vancouver School of Economics, revised 30 Jun 2014.
    5. Merino, Fernando, 2012. "Firms' internationalization and productivity growth," Research in Economics, Elsevier, vol. 66(4), pages 349-354.
    6. Burda, Michael C. & Severgnini, Battista, 2014. "Solow residuals without capital stocks," Journal of Development Economics, Elsevier, vol. 109(C), pages 154-171.
    7. Diewert, Erwin, 2018. "Duality in Production," Microeconomics.ca working papers erwin_diewert-2018-2, Vancouver School of Economics, revised 06 Feb 2018.
    8. Md. Abul Kalam Azad & Abdul Kadar Muhammad Masum & Susila Munisamy & Dilruba Fatima Sharmin, 2016. "Efficiency analysis of major microfinance institutions in Bangladesh: a Malmquist index approach," Quality & Quantity: International Journal of Methodology, Springer, vol. 50(4), pages 1525-1537, July.
    9. Hideyuki Mizobuchi, 2014. "Returns to scale effect in labour productivity growth," Journal of Productivity Analysis, Springer, vol. 42(3), pages 293-304, December.

    More about this item

    Keywords

    Productivity; index numbers; Malmquist indexes; Törnqvist indexes; returns to scale; non-competitive behavior; flexible functional forms.;

    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
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production

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