A circular Malmquist-type index for measuring productivity

Maria C.A.S. Portela, Emmanuel Thanassoulis

Research output: Working paper

Abstract

This paper develops two new indices for measuring productivity in multi-input multi-output situations. One index enables the measure of productivity change of a unit over time while the second index makes it possible to compare two units on productivity at the same or different points in time. Productivity in a single input single output context is defined as the ratio of output to input. In multi-input multi-output contexts this ratio is not defined. Instead, one of the methods traditionally used is the Malmquist Index of productivity change over time. This is computed by reference to the distances of the input-output bundles of a production unit at two different points in time from the efficient boundaries corresponding to those two points in time. The indices developed in this paper depart form the use of two different reference boundaries and instead they use a single reference boundary which in a sense is the most efficient boundary observed over two or more successive time periods. We discuss the assumptions which make possible the definition of such a single reference boundary and proceed to develop the two Malmquist-type indices for measuring productivity. One key advantage of using a single reference boundary is that the resulting index values are circular. That is it is possible to use the index values of successive time periods to derive an index value of productivity change over a time period of any length covered by successive index values or vice versa. Further, the use of a single reference boundary makes it possible to construct an index for comparing the productivities of two units either at the same or at two different points in time. This was not possible with the traditional Malmquist Index. We decompose both new indices into components which isolate production unit from industry or comparator unit effects. The components themselves like the indices developed are also circular. The components of the indices drill down to reveal more clearly the performance of each unit over time relative either to itself or to other units. The indices developed and their components are aimed at managers of production units to enable them to diagnose the performance of their units with a view to guiding them to improved performance.
Original languageEnglish
Place of PublicationBirmingham (UK)
PublisherAston University
ISBN (Print)978-1-85449-724-6
Publication statusPublished - Jan 2008

Publication series

NameAston Business School research papers
PublisherAston University
No.0802

Fingerprint

Malmquist
Productivity
Productivity change
Malmquist index
Industry
Managers

Keywords

  • Malmquist indices
  • DEA
  • circularity
  • meta-frontier

Cite this

Portela, M. C. A. S., & Thanassoulis, E. (2008). A circular Malmquist-type index for measuring productivity. (Aston Business School research papers; No. 0802). Birmingham (UK): Aston University.
Portela, Maria C.A.S. ; Thanassoulis, Emmanuel. / A circular Malmquist-type index for measuring productivity. Birmingham (UK) : Aston University, 2008. (Aston Business School research papers; 0802).
@techreport{182a1a5ed9734536b19a66fae4e519ed,
title = "A circular Malmquist-type index for measuring productivity",
abstract = "This paper develops two new indices for measuring productivity in multi-input multi-output situations. One index enables the measure of productivity change of a unit over time while the second index makes it possible to compare two units on productivity at the same or different points in time. Productivity in a single input single output context is defined as the ratio of output to input. In multi-input multi-output contexts this ratio is not defined. Instead, one of the methods traditionally used is the Malmquist Index of productivity change over time. This is computed by reference to the distances of the input-output bundles of a production unit at two different points in time from the efficient boundaries corresponding to those two points in time. The indices developed in this paper depart form the use of two different reference boundaries and instead they use a single reference boundary which in a sense is the most efficient boundary observed over two or more successive time periods. We discuss the assumptions which make possible the definition of such a single reference boundary and proceed to develop the two Malmquist-type indices for measuring productivity. One key advantage of using a single reference boundary is that the resulting index values are circular. That is it is possible to use the index values of successive time periods to derive an index value of productivity change over a time period of any length covered by successive index values or vice versa. Further, the use of a single reference boundary makes it possible to construct an index for comparing the productivities of two units either at the same or at two different points in time. This was not possible with the traditional Malmquist Index. We decompose both new indices into components which isolate production unit from industry or comparator unit effects. The components themselves like the indices developed are also circular. The components of the indices drill down to reveal more clearly the performance of each unit over time relative either to itself or to other units. The indices developed and their components are aimed at managers of production units to enable them to diagnose the performance of their units with a view to guiding them to improved performance.",
keywords = "Malmquist indices, DEA, circularity, meta-frontier",
author = "Portela, {Maria C.A.S.} and Emmanuel Thanassoulis",
year = "2008",
month = "1",
language = "English",
isbn = "978-1-85449-724-6",
series = "Aston Business School research papers",
publisher = "Aston University",
number = "0802",
type = "WorkingPaper",
institution = "Aston University",

}

Portela, MCAS & Thanassoulis, E 2008 'A circular Malmquist-type index for measuring productivity' Aston Business School research papers, no. 0802, Aston University, Birmingham (UK).

A circular Malmquist-type index for measuring productivity. / Portela, Maria C.A.S.; Thanassoulis, Emmanuel.

Birmingham (UK) : Aston University, 2008. (Aston Business School research papers; No. 0802).

Research output: Working paper

TY - UNPB

T1 - A circular Malmquist-type index for measuring productivity

AU - Portela, Maria C.A.S.

AU - Thanassoulis, Emmanuel

PY - 2008/1

Y1 - 2008/1

N2 - This paper develops two new indices for measuring productivity in multi-input multi-output situations. One index enables the measure of productivity change of a unit over time while the second index makes it possible to compare two units on productivity at the same or different points in time. Productivity in a single input single output context is defined as the ratio of output to input. In multi-input multi-output contexts this ratio is not defined. Instead, one of the methods traditionally used is the Malmquist Index of productivity change over time. This is computed by reference to the distances of the input-output bundles of a production unit at two different points in time from the efficient boundaries corresponding to those two points in time. The indices developed in this paper depart form the use of two different reference boundaries and instead they use a single reference boundary which in a sense is the most efficient boundary observed over two or more successive time periods. We discuss the assumptions which make possible the definition of such a single reference boundary and proceed to develop the two Malmquist-type indices for measuring productivity. One key advantage of using a single reference boundary is that the resulting index values are circular. That is it is possible to use the index values of successive time periods to derive an index value of productivity change over a time period of any length covered by successive index values or vice versa. Further, the use of a single reference boundary makes it possible to construct an index for comparing the productivities of two units either at the same or at two different points in time. This was not possible with the traditional Malmquist Index. We decompose both new indices into components which isolate production unit from industry or comparator unit effects. The components themselves like the indices developed are also circular. The components of the indices drill down to reveal more clearly the performance of each unit over time relative either to itself or to other units. The indices developed and their components are aimed at managers of production units to enable them to diagnose the performance of their units with a view to guiding them to improved performance.

AB - This paper develops two new indices for measuring productivity in multi-input multi-output situations. One index enables the measure of productivity change of a unit over time while the second index makes it possible to compare two units on productivity at the same or different points in time. Productivity in a single input single output context is defined as the ratio of output to input. In multi-input multi-output contexts this ratio is not defined. Instead, one of the methods traditionally used is the Malmquist Index of productivity change over time. This is computed by reference to the distances of the input-output bundles of a production unit at two different points in time from the efficient boundaries corresponding to those two points in time. The indices developed in this paper depart form the use of two different reference boundaries and instead they use a single reference boundary which in a sense is the most efficient boundary observed over two or more successive time periods. We discuss the assumptions which make possible the definition of such a single reference boundary and proceed to develop the two Malmquist-type indices for measuring productivity. One key advantage of using a single reference boundary is that the resulting index values are circular. That is it is possible to use the index values of successive time periods to derive an index value of productivity change over a time period of any length covered by successive index values or vice versa. Further, the use of a single reference boundary makes it possible to construct an index for comparing the productivities of two units either at the same or at two different points in time. This was not possible with the traditional Malmquist Index. We decompose both new indices into components which isolate production unit from industry or comparator unit effects. The components themselves like the indices developed are also circular. The components of the indices drill down to reveal more clearly the performance of each unit over time relative either to itself or to other units. The indices developed and their components are aimed at managers of production units to enable them to diagnose the performance of their units with a view to guiding them to improved performance.

KW - Malmquist indices

KW - DEA

KW - circularity

KW - meta-frontier

M3 - Working paper

SN - 978-1-85449-724-6

T3 - Aston Business School research papers

BT - A circular Malmquist-type index for measuring productivity

PB - Aston University

CY - Birmingham (UK)

ER -

Portela MCAS, Thanassoulis E. A circular Malmquist-type index for measuring productivity. Birmingham (UK): Aston University. 2008 Jan. (Aston Business School research papers; 0802).