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Productivity and Intermediate Products: A Frontier Approach

Author

Listed:
  • Rolf Fare

    (SIU at Carbondale)

  • Shawna Grosskopf

    (SIU at Carbondale)

Abstract

The purpose of this paper is to introduce a frontier model for productivity measurement that explicitly recognizes that some inputs are produced and consumed within the production technology. Here we differ from Koopmans (1951) by assuming that the intermediate inputs may also be final output. This assumption is in line with current international trade theory, where intermediate inputs are tradable. Our model consists of two production units that are interconnected in a network to form a production technology. The productivity measure employed here is the so-called Malmquist productivity index. This index consists of ratios of distance functions. Here these distance functions are defined on the network technology and they are computed using linear programming techniques.

Suggested Citation

  • Rolf Fare & Shawna Grosskopf, 1995. "Productivity and Intermediate Products: A Frontier Approach," Computational Economics 9506001, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpco:9506001
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    References listed on IDEAS

    as
    1. Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
    2. Caves, Douglas W & Christensen, Laurits R & Diewert, W Erwin, 1982. "The Economic Theory of Index Numbers and the Measurement of Input, Output, and Productivity," Econometrica, Econometric Society, vol. 50(6), pages 1393-1414, November.
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    JEL classification:

    • C8 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs

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