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.

total factor productivity, index, decomposition, Malmquist, Moorsteen, Bjurek, Fisher, Törnqvist
Index Numbers and Aggregation (jel C43), Production; Capital and Total Factor Productivity; Capacity (jel D24), Allocative Efficiency; Cost Benefit Analysis (jel D61)
ERIM Report Series Research in Management
ERIM report series research in management Erasmus Research Institute of Management
Erasmus Research Institute of Management

Balk, B.M, & Zofío, J.L. (2018). The Many Decompositions of Total Factor Productivity Change (No. ERS-2018-003-LIS). ERIM report series research in management Erasmus Research Institute of Management. Retrieved from