Sustainable total factor productivity growth for 55 states: An application of the new malmquist index considering ecological footprint and human development index

Abstract

Expanding the total factor productivity framework has a profound theoretical and practical value for sustainable growth. This paper proposes a new indicator called the “Sustainable Total Factor Productivity”. The new indicator simultaneously incorporates two comprehensive indicators, ecological footprint, which reflects human ecological consumption; and, human development index, which measures human well-being levels, into the traditional total factor productivity framework to measure sustainable growth. The sustainable total factor productivity indicator considers ecological inputs such as energy consumption, built-up land usage and biological resources occupation, while taking into account the comprehensive outputs of economic growth, life expectancy and education levels. This new indicator can better measure a state’s sustainable growth. The Data Envelopment Analysis-Malmquist method and the convergence test are employed to estimate its changes and test its convergence for 55 nations for the period 1994 to 2014. The primary results indicate that: (1) the average sustainable total factor productivity growth for these nations shows a downward trend suggesting that most states placed less emphasis on sustainable growth. The downward trend resulted primarily from the slow growth of sustainable technical progress. (2) 19 of the 55 states had positive, sustainable total factor productivity growth and achieved sustainable growth. (3) Fifty-five states and four subgroup states converged towards steady-state levels.