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Malmquist productivity index decompositions: a unifying framework

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Zofio, Jose L.

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Abstract In two widely cited but unpublished working papers, Simar and Wilson (1998) and Zofío and Lovell (1998) proposed an alternative decomposition of the Malmquist Productivity Index, which retained what seemed to be the strongholds of previous proposals with regard to the contribution of technological and efficiency change to productivity change. Namely, a technical change term with regard to the best practice (VRS) technology which is to be found in Ray and Desli (1997) and a scale efficiency change term that illustrates a firm’s situation with regard to optimal scale (benchmark technology), Färe, Grosskopf, Norris and Zhang (1994). Attaining this objective required the introduction of an additional term in the Malmquist Productivity Index decomposition, which would reflect the scale bias of technical change. It is our objective to provide economic rationale for this term within a theory of production context, the existing decompositions and recent articles that further elaborate on this issue. The ideas are illustrated using productivity trends in 17 OECD countries.
Classification Political Economy; Economic Statistics, Econometrics, Business Informatics
Free Keywords Productivity Change; Malmquist Indices; Distance Functions
Document language English
Publication Year 2007
Page/Pages p. 2371-2387
Journal Applied Economics, 39 (2007) 18
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)