Shadow price approach to total factor productivity measurement: With an application to Finnish grass-silage production

Timo Kuosmanen, Thierry Post, Timo Sipiläinen

Research output: Contribution to journalArticlepeer-review

9 Citations (Scopus)

Abstract

This paper explores an intermediate route between the Fisher and the Malmquist productivity indexes so as to minimize data requirements and assumptions about economic behavior of production units and their production technology. Assuming quantity data of inputs and outputs and the behavioral hypothesis of allocative efficiency, we calculate the exact value of the Fisher ideal productivity index using implicit shadow prices revealed by the choice of input-output mix. The approach is operationalized by means of a nonparametric data envelopment analysis (DEA) model. Empirical application to Finnish grass silage farms suggests that the Malmquist and the Fisher productivity indices yield similar results when averaged over firms, but there can be major differences in the results of the two approaches at the level of individual firms.

Original languageEnglish
Pages (from-to)95-121
Number of pages27
JournalJournal of Productivity Analysis
Volume22
Issue number1-2
DOIs
Publication statusPublished - 2004

Keywords

  • Data envelopment analysis
  • Fisher ideal index
  • Index numbers and aggregation
  • Malmquist index
  • Shadow prices
  • Total factor productivity (TFP)

ASJC Scopus subject areas

  • Business and International Management
  • Social Sciences (miscellaneous)
  • Economics and Econometrics

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