The Many Decompositions of Total Factor Productivity Change
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.
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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 http://hdl.handle.net/1765/104721