Productivity change of Taiwanese farmers’ credit unions: a nonparametric metafrontier Malmquist–Luenberger productivity indicator

Abstract

This study proposes a risk-adjusted productivity index based on the concept of the metfrontier. It can be decomposed into different sources beyond the change in technical efficiency and technology. Furthermore, as per the technology gap ratio existing in the relationship between a current (group-specific) technology and its potential technology (the metafrontier), there is a technology adjustment factor (TAF) in the relationship between the group-specific Malmquist–Luenberger productivity index and the metafrontier Malmquist–Luenberger productivity index. TAF can be further decomposed into the technology gap ratio change and the relative technology change of the meatfrontier to a group-specific technology (RTC). All the above components are measured by directional output distance functions which simultaneously accounts for desirable and undesirable outputs. Panel data of the Taiwanese credit departments of farmers’ associations covering the period 2006–2010 are illustrated to implement the above measurement and decomposition.