The Many Decompositions of Total Factor Productivity Change

Bert Balk and José Zofío

ERIM Report Series Research in Management from 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

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.

Keywords: total factor productivity; index; decomposition; Malmquist; Moorsteen; Bjurek; Fisher; Törnqvist (search for similar items in EconPapers)
JEL-codes: C43 D24 D61 (search for similar items in EconPapers)
Pages: 150
Date: 2018-04-04
New Economics Papers: this item is included in nep-eff
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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