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

Walter Diewert and Kevin Fox

Economics working papers from Vancouver School of Economics

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.

Keywords: Productivity; index numbers; Malmquist indexes; Törnqvist indexes; returns to scale; non-competitive behavior; flexible functional forms. (search for similar items in EconPapers)
JEL-codes: C43 D24 E23 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2010-02-17, Revised 2010-07-13
New Economics Papers: this item is included in nep-eff
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Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:ubc:bricol:erwin_diewert-2010-5

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