A cost Malmquist productivity index

A cost Malmquist productivity index

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Article ID: iaor20051979
Country: Netherlands
Volume: 154
Issue: 2
Start Page Number: 396
End Page Number: 409
Publication Date: Apr 2004
Journal: European Journal of Operational Research
Authors: ,
Keywords: measurement, performance
Abstract:

This paper develops a productivity index applicable when producers are cost minimisers and input prices are known. The index is inspired by the Malmquist index as extended to productivity measurement. The index developed here is defined in terms of input cost rather than input quantity distance functions. Hence, productivity change is decomposed into overall efficiency and cost technical change. Furthermore, overall efficiency change is decomposed into technical and allocative efficiency change and cost technical change into a part capturing shifts of input quantities and shifts of relative input prices. These decompositions provide a clearer picture of the root sources of productivity change. They are illustrated here in a sample of hospitals; results are computed using non-parametric mathematical programming.

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