Total factor productivity growth in private sector hospitals of India: an assessment through MPI approach

Abstract

This paper applies data envelopment analysis (DEA) based Malmquist productivity index (MPI) approach to examine the total factor productivity (TFP) growth and its components of 50 private sector hospitals of India for the period 2004–2005 to 2009–2010. The study finds that on average, the TFP change, technical change and technical efficiency changes are found to be 2.8%, 0.8% and 2% per annum over the sample time period respectively. In order to identify the sources of TFP change, technical efficiency change (catch–up effect) and technical change (frontier shift) for each hospital over the six years period are also measured. The results show that there is significant change in technical efficiency and remarkable change is found in the technology. Thus, the decomposed TFP index shows that much of the observed growth in productivity change is largely explained by efficiency change (catch–up effect) rather than the technology change (frontier shift) over the simple study period.