A proposal for decomposing and adjusting the conventional Divisia index for the measure of productivity

Xosé Rodríguez

Economic Development from University of Santiago de Compostela. Faculty of Economics and Business. Econometrics.

Abstract: This paper proposes a general framework for decomposing (without incorporating restrictive assumptions) the conventional Divisia index of productivity into for types of effects: technological, subequilibrium, scale, and so -called "market" effects or mark-ups. We believe, however, that this last component is due to a "defect" in the aggregation of the productions in the Divisia index itself, in situations where the conditions of long-run competitive equilibrium are not meet in the product markets. Therefore we adjust the index and conclude with a decomposition equation (with technical subequilibrium and scale effects) which is flexible and generic. Use of the framework is illustrated empirical for the Spanish energy mining sector.

Keywords: the Divisia index; total factor productivity (search for similar items in EconPapers)
Pages: 27 pages
Date: 1999
New Economics Papers: this item is included in nep-eff and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:eaa:ecodev:41

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