Abstract
This study proposes an alternative Malmquist productivity index for measuring productivity growth that can be applied to an unbalanced panel data set by considering the progressive nature of technology. The proposed methodology overcomes the weakness of the conventional Malmquist productivity index, which bears spurious technical change and cannot be applied to unbalanced panel data. To develop the methodology, we integrated the concepts of the sequential production possibility set of Tulkens and Vanden Eeckaut (Eur J Oper Res 80:474–499, 1995) and of the global frontier of Asmild and Tam (J Prod Anal 27:137–148, 2007). The suggested index is applied to analyze unbalanced panel data on electric utilities of Korea and the USA between 2001 and 2010. Using the empirical investigation, we show how the suggested index overcomes the fictitious technical regress phenomenon and can be employed for unbalanced panel data.
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Notes
The input distance function can be employed in calculating the Malmquist productivity index. The directional distance function can also be used.
The productivity indexes shown in Table 1 are rounded up at the fourth decimal place. If the original numbers are used, the exactly same productivity index is found for the multiplication result.
Interested readers can obtain the measurement results on request to the authors. We appreciate an anonymous reviewer for the suggestion to broaden numerical examples.
Each country’s global PPS is constructed by all the observations of the country. The global frontier of this country is the farthest boundary of its PPS. Hence, two global frontiers are constructed for this measuring. For detailed measuring concept, see Asmild and Tam (2007).
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Acknowledgments
The authors are grateful for helpful comments from the participants at the 2014 Asia-Pacific Productivity Conference in Brisbane, Australia on earlier version of this paper. This research was supported by Basic Science Research Program through the National Research Foundation of Korea (NRF) funded by the Ministry of Science, ICT & Future Planning (NRF-2015R1A1A1A05001307).
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Appendix
Appendix
1.1 Property of the technology index
Let us consider the circumstance when a data set is unbalanced. Denote the number of observations in the time period \(\tau \) as \(K(\tau )\), and the set \(\aleph =\{K(\tau )|\tau =1,\ldots ,T\}\). The number of elements in the set \(\aleph \) corresponds to the number of observations for the whole periods. Then, the technology index can be reformulated as follows:
In the above equation, the ODF of missing observations, which are not in \(\aleph \), is seen as unity. But note that other figures of these missing observations cannot be defined.
Proposition 1
The contemporaneous Malmquist productivity index and technical change component (TC) do not satisfy the transitivity, while the efficiency change component (EC) does.
Proof
\(\square \)
Proposition 2
The SGM index and its decomposed components satisfy the transitivity.
Proof
\(\square \)
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Oh, Y., Oh, Dh. & Lee, JD. A sequential global Malmquist productivity index: Productivity growth index for unbalanced panel data considering the progressive nature of technology. Empir Econ 52, 1651–1674 (2017). https://doi.org/10.1007/s00181-016-1104-6
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DOI: https://doi.org/10.1007/s00181-016-1104-6