Fisher Ideal Index Research Articles

Is the output growth rate in NIPA a welfare measure?

Abstract This paper shows that, in a dynamic general equilibrium framework, the rate of output growth as measured by national income and product accounts reflects changes in welfare in the precise sense of equivalent variation. The main argument is straightforward. In a two-sector dynamic general equilibrium model of heterogeneous households, recursive preferences and quasi-concave technology, the Bellman equation provides a representation of household preferences over current consumption and investment. When applied to this representation of preferences, a Fisher–Shell true quantity index turns out to be equal to the Divisia index, closely approximated by the Fisher ideal chain index used in national income and product accounts.

Assessing the potential for energy efficiency improvements in Latin America and Caribbean

This study assesses energy intensity trends in the Latin America and Caribbean region, identifies key regional drivers for energy efficiency improvements, and proposes policy recommendations using a rich panel dataset of 25 Latin American countries over the last 20 years. The results of the Fisher Ideal Index Decomposition, followed by the regression analysis, demonstrate that sectoral energy efficiency improvements account for most of the historical energy intensity declines in the region, also highlighting the importance of energy prices and regulatory policies. Counterfactual simulations show potential for significant improvements in otherwise stagnant energy intensity in the region by eliminating fossil fuel subsidies and achieving better national planning, strengthening implementation and governance capacity, and improving access to energy efficiency financing mechanisms.

Estimating the productivity of US agriculture: The Fisher total factor productivity index for time series data with unknown prices

AbstractIn this paper, we propose a straightforward way to estimate the Fisher ideal total factor productivity (TFP) index (FI) in cases where price information is unavailable, using ‘shadow prices’ derived from data envelopment analysis (DEA). A Monte Carlo experiment shows that the shadow price Fisher ideal TFP index (SPFI) can effectively estimate the ‘true’ FI with relatively small (and stable) errors. The empirical application to the US agriculture sector (1948–2017) further suggests that the SPFI is a (superior) alternative to the traditional Malmquist DEA, especially in dealing with unbalanced panel or time series data when price data are unknown.

Long-term effects of the global budget program and periodic price adjustment on antibacterial agents: A nationwide decomposition analysis between 2001 and 2016

Previous studies have shown that financial strategies are beneficial for improving the appropriate use of antibiotics within a limited period of time. Long-term effects have rarely been explored. This study evaluated the changes in expenditure and prescription patterns of antibacterial agents under the global budget (GB) program and drug price adjustment of a National Health Insurance scheme. Two structural methods, that is, the Laspeyres method and Fisher's Ideal Index decomposition method, were used to illustrate the impacts of price, volume, and drug change. During the first 5 years of the GB program (ie, 2001-2006), the expenses of antibacterial agents increased by 54.1%, while the volume decreased by 11% to 21.3%. Therapeutic choice was the predominant cause of expense growth. In the second and third 5-year periods (ie, 2006-2011 and 2011-2016), the driving force of therapeutic choice gradually decreased. The antibacterial expense remained stable with a slight increase in prescription volume. Periodic price adjustment contributed steadily to cost containment, by 21.9% to 39.9%. The GB program led to a remarkable increase in antibacterial expenses mainly attributed to therapeutic choice, especially in the early stage. In contrast, periodic price adjustment, provided steady benefits to pharmaceutical budget control without a noticeable increase in drug volume.

Impact of Key Drivers on Energy Intensity and GHG Emissions in Manufacturing in the Baltic States

The improvement in energy efficiency (EE) and increasing consumption of renewable energy sources (RES) in manufacturing play an important role in pursuing sustainable development in the Baltic States and contribute to the transition to a low-carbon economy. This paper presents the results of a detailed analysis of the channel through which EE, along with structural activity changes, passes energy intensity and total energy savings and in combination with other key drivers results in reductions in greenhouse gas (GHG) emissions in manufacturing in Estonia, Latvia, and Lithuania during the period 2010–2020, taking into account the role of transformations in the energy and climate framework of the European Union (EU). The Fisher Ideal Index, the Kaya identity, the Logarithmic Mean Divisia Index (LMDI), and comparative analysis methods are used. The results of the impact analysis of key drivers on energy intensity showed different contributions towards improvements in EE and structural activity changes to changes in energy intensity in manufacturing, which decreased by 53.1% in Estonia, by 30.5% in Lithuania, and by 16.5% in Latvia. The dominant role of EE improvements on total energy savings is identified. The results of the GHG decomposition analysis showed that because of improvements in energy intensity, reductions in the share of fossil fuels, and increases in labour productivity, number of employees, and emissions intensity, the GHG emissions decreased by 35.5% in Estonia, 40.4% in Latvia, and 8.1% in Lithuania. The results confirm the need for new policies and the implementation of relevant commitments to save energy and increase the contribution of RES in all three countries.

Effects of Energy Efficiency Index on Economic Activity: The Case of G7 Countries

This investigation aims to examine the effects of energy efficiency improvements on economic growth for G7 countries during 1971-2018. To measure energy efficiency, we calculate the energy efficiency index (EEI) using the Fisher Ideal index decomposition method. This study utilizes capital and labor as control variables, in addition to the EEI variable, as determinants of economic growth. Methodologically, this paper conducts the LM (Lagrange Multiplier) bootstrap panel cointegration test which is developed by Westerlund ve Edgerton (2007), and the AMG (Augmented Mean Group) estimator of Eberhardt ve Teal (2010). Both methodologies take into consideration of cross-sectional dependency (CD) issue in the panel setting. The empirical results of this paper indicate that there is a cointegration relationship between the aforementioned variables. In detail, the impact of capital formation on economic growth is positive for all countries, while the effect of labor varies across countries. Besides, it is found that an improvement in energy efficiency leads to an advancement in economic growth for five out of seven G7 countries. The empirical findings of this paper provide some implications for policymakers.

Reactions of energy intensity, energy efficiency, and activity indexes to income and energy price changes: The panel data evidence from OECD countries

Energy has had an important effect on the economic growth process of the countries for decades. Therefore, it has received attention from practitioners in the empirical literature of energy economics. This study aims to explore the factors affecting energy intensity, energy efficiency, and activity indexes for 27 OECD countries during the period 1980–2018. For this purpose, the study constructs the energy indexes through the decomposition analysis based on the Fisher ideal index. Then, per capita gross domestic product and energy prices index are used as a proxy for income and energy prices. In this study, the authors conduct recent panel data techniques that take into consideration the cross-sectional dependence. The empirical results of this paper exhibit that income affects both the energy intensity index and the energy efficiency index negatively for most countries. In contrast, its effect on the activity index varies across countries. Besides, it is found that energy prices’ impact on these three indexes is mixed; economies reacted to the change in prices differently due to their country-specific characteristics. These empirical findings suggest several courses of action for policymakers.

Impact of Nigeria's industrial sector on level of inefficiency for energy consumption: Fisher Ideal index decomposition analysis

This paper tries to evaluate the impact of manufacturing-industry sector on the level of inefficient consumption of energy in Nigeria. The Fisher Ideal index decomposition analysis and the VEC model are used for results for the time period from 1991 to 2014. The examined findings indicate that energy efficiency in Nigeria is linked with the per capita income from overall country's economic growth, emissions of component of CO2, consumption of energy and investment for industrial production. In Nigeria, however, systemic reform indicates negative impact on energy production. Furthermore, for the short span of time interval, all variables have concluded with a negative relation with the production of efficient energy. According to the findings of this paper, economic growth, low carbon emissions, and industrial investment are all essential for Nigeria's energy efficiency policies to be intensified. As a result, policymakers and the government should take steps to resolve these issues.

Energy efficiency in South Asia: Trends and determinants

The efficient use of energy can reduce energy demand, improve energy security and economic competitiveness, and reduce environmental degradation. Using data from the United Nations Statistics Division, the paper analyses the trends in energy efficiency across countries in South Asia (SA) and identifies the determinants of the same. Unlike other studies in the context of SA, this study considers energy consumption of all energy-types taking place in all sectors of the economy. The study applies Logarithmic Mean Divisia Index-I to decompose the change in energy consumption during 1990–2014 into activity, structure, and intensity effects. The results show that the expansion in economic activities mainly drives energy consumption, and the shift toward energy intensive sectors further augments it. However, the decline in energy intensity restrains energy consumption in all the South Asian countries barring Nepal and Bhutan. The Composite Energy Intensity Index and the Fisher Ideal Intensity Index are also estimated to check the robustness of these results. The estimation of a panel regression model identifies endowment of energy resources, production of renewable energy, crude price, population density and GDP per capita as significant factors influencing energy efficiency in SA. These results have significant implications for energy use policy.

Does distribution of energy innovation impact distribution of income: A quantile-based SDG modeling approach

Despite the ongoing research on energy innovation and economic growth, little is known on how degree of energy innovation impacts income inequality within a nation. To address this research gap, we have developed a bivariate model to analyze how distribution of energy innovation affects the income distribution in a certain country. Using the Fisher Ideal Index, we have calculated energy efficiency as an indicator of energy innovation. Quantile-on-Quantile regression has been applied to capture the impact on energy innovation across different income quantiles in Next 11 (N11) countries. Results show that energy innovation can have different outcomes, across the member countries of N11 group, namely a) equitable and positive impact, (b) negative impact, and (c) inequitable impact in terms of distribution of income. We have inferred important policy implications, which might lead to sustainable development strategies in N11 countries. This study is one of the first to establish the direct link between energy innovation and income inequality across different quantiles within a nation. Further, we successfully demonstrate the application of advanced quantile methods in inferring Sustainable Development Goal (SDG) focused policy implications.

Energy resource melioration and CO2 emissions in China and Nigeria: Efficiency and trade perspectives

Circular economy is one effective strategy to achieve a healthy environment and efficient use of resources. In this study, the trade relationship between China and Nigeria is used to establish how circular economy ameliorates climate change. On the basis of CO2 emissions, data from 1991 to 2014 are obtained and measures for energy efficiency in the mining and extractive-related sectors from energy intensity are derived using Fisher ideal index decomposition. This study utilizes panel-corrected standard error, feasible generalized least squares, autoregressive distribute lag bound, and Bayesian VAR models. These techniques suggest that energy efficiency in the mining and extractive-related sector and the circular economy have not translated into CO2 emission reduction in both countries. However, economic growth, energy use (non-renewable energy), and clean energy substitution (renewable energy) are essential factors in mitigating CO2 emissions. Given such evidence, resource melioration for energy consumption and economic growth have indispensable roles in reducing CO2 emissions.

Comparative analysis of energy efficiency trends and driving factors in the Baltic States

The improvement of energy efficiency is an essential strategic objective of sustainable energy sector development in the Baltic countries and can significantly facilitate the transition to a low-carbon economy. The paper provides findings from comparative analysis of energy intensity trends during the period 2000–2018 in Estonia, Latvia and Lithuania in the context of energy and climate framework of the European Union (EU). Changes in energy intensity are analysed in each country on three stages: primary energy intensity, final energy intensity and sectoral energy intensity. Based on application of the Fisher Ideal Index, contribution from the increase of energy efficiency and from structural activity changes in the Baltic countries is revealed. The paper provides valuable insights from the detailed analysis of energy intensity in each country and comparison with average indicators in the EU-27 and other countries of the Baltic Sea Region (BSR). High energy conversion losses in Estonia, high share of energy intensive industries and fast increase of energy consumption in the Lithuanian transport sector are emphasized as factors limiting further increase of energy efficiency. The results confirm the need of new policies and relevant energy saving obligations in all three countries.

Elementary Index Bias: Evidence for the Euro Area from a Large Scanner Dataset

Abstract We provide evidence on the effect of elementary index choice on inflation measurement in the euro area. Using scanner data for 15,844 individual items from 42 product categories and 10 euro area countries, we compute product category level elementary price indexes using eight different elementary index formulas. Measured inflation outcomes of the different index formulas are compared with the Fisher ideal index to quantify elementary index bias. We have three main findings. First, elementary index bias is quite variable across product categories, countries and index formulas. Second, a comparison of elementary index formulas with and without expenditure weights shows that a shift from price only indexes to expenditure weighted indexes would entail at the product level multiple percentage points differences in measured price changes. And finally, we show that elementary index bias is quantitatively more important than upper level substitution bias.

Factors behind electricity intensity and efficiency: An econometric analysis for Pakistan

In Pakistan, electricity intensity has increased sharply since 1970's. This study combines decomposition and econometric analysis to examine the socio-economic determinants of increasing electricity intensity in Pakistan. Using Fisher Ideal Index, it is observed that the intensity increase is primarily due to efficiency changes. The econometric analysis indicates that per capita income is the main factor that has increased the electricity intensity through efficiency deterioration, while higher education improves electricity efficiency. The electricity price has ineffective role in changing electricity intensity; may be due to the fact that price is not allowed to adjust to costs changes. On the other hand, the prices of substitutes turn-out to be highly significant; electricity and gas consumption substitutes while oil use is complementary to electricity. This implies that education is better placed to impart awareness among the people about the severe electricity crisis in Pakistan. Moreover, the findings that prices have no significant effects on activity mix imply that energy prices may be deregulated to improve efficiency. Additionally, if government wants to use price as a tool to improve efficiency through interventionist approach, then it has to take care of the possible substitutability among different energy sources.

TOTAL PRODUCTIVITY AND PROFITABILITY ANALYSES OF TURKISH BORON MINING

Productivity is one of the primary indicators used to determine enterprise performances. The fact that profitability is high in Turkey Boron Mining sector has led to undervaluing the studies related to productivity. Due to the structure of the boron market and the product range’s quality to be able to substitute for each other, the potential future price drops to be caused by competition is considered to draw attention to productivity measurement and assessment studies. In this study, the model called as “Aggregate Index for the Analysis of Total Productivity and Rentability (AIPR)” was restructured by means of Fisher Ideal Index. The developed model was applied to Turkey Boron Mining Sector between the years 1980 and 2001 in order to see the current position with regard to productivity and to determine which points to focus on to increase productivity. It was established that the sector’s profitability and productivity level according to the base year was high and that technological change played the leading role in achieving high productivity. Also in this study, statistical analyses were carried out in order to determine the relation between the input parameters of Turkey Boron Mining Sector and indices of productivity and profitability.

Scanner Data-Based Panel Price Indexes.

We construct panel price indexes using retail scanner data that allow comparisons of consumption cost across space and time. Two types of panel indexes are examined: the rolling-window panel extensions of the multilateral Cave-Christensen-Diewert (CCD) index with the Törnqvist index as its elements, and of the multilateral Gini-Eltetö-Köves-Szulc (GEKS) index using the Fisher ideal index as its elements. The rolling window method maintains the nonrevisability of published index numbers while it allows index numbers for new periods and locations be calculated and the basket of items be updated. Meanwhile, the multilateral structure of price comparison eliminates significant downward drift in standard chained indexes. Using county-level bilateral and panel indexes based on retail beverage scanner data, we experimentally adjust for purchasing parity the portion of Supplemental Nutrition Assistance Program (SNAP) benefits that participants spend on beverages. Accounting for temporal and spatial cost differences causes over 2% of SNAP allotment spent on beverages be reallocated, or approximately a 5% change in allotment on average for a county. About 90% of the relocated SNAP fund is to adjust for spatial differences in food cost. We also compare SNAP allotments implied by the retail scanner data indexes with those implied by indexes based on the USDA Quarterly Food-at-Home Price Database (QFAHPD). The treatment of unit values and product quality may have contributed to the significant differences observed between the retail scanner data indexes and the QFAHPD indexes.

Population and trends in the global mean temperature

The Fisher ideal index, developed to measure price inflation, is applied to define a population-weighted temperature trend. This method has the advantages that the trend is representative for the population distribution throughout the sample but without conflating the trend in the population distribution and the trend in the temperature. I show that the trend in the global area-weighted average surface air temperature is different in key details from the population-weighted trend. I extend the index to include urbanization and the urban heat island effect. This substantially changes the trend again. I further extend the index to include international migration, but this has a minor impact on the trend.

Changes in Energy Intensity in Canada

Canada is one of the top energy users and CO2 emitters among the OECD countries. However, energy intensity has been declining, on average, by about 1.4 percent since 1980. In this paper, we use the Fisher Ideal Index to determine the contribution of changes in the composition of economic activities and efficiency to a decline in energy intensity in Canada at national, provincial, and industry levels. We also apply panel data estimation methods to further investigate the factors driving energy intensity, efficiency and activity indexes for the period 1981-2008. We test for endogeneity as well as cross-section dependency in the provincial data and control for factors such as climate, policy, and energy endowment. The national and provincial decomposition results suggest that most of the reduction in energy intensity has occurred mainly due to improvements in energy efficiency rather than shifts in economic activities. Within the industry, while energy intensity has declined significantly in manufacturing, it has remained stable in transportation, utilities, and construction, and increased significantly in oil extraction and mining industries. The provincial panel regression results indicate that energy intensity is higher in provinces with higher average incomes, faster population growth, colder climate, and a higher capital-labour ratio, and lower in provinces with higher energy prices and higher investment. The industry panel regression results show that investment has contributed to energy efficiency in utilities and mining and to a shift away from energy-intensive activities in manufacturing and transportation industries. Technological advances have been most effective in increasing energy efficiency in construction and utilities and in decreasing energy-intensive activities in manufacturing industries. The results indicate that although efficiency contributes to a reduction in energy intensity in Canada, increasing activity in energy-intensive industries, such as oil and mining, partially offsets the efficiency gains in other industries.

Factors Contributing to Increases in Prescription Drug Expenditures Borne by National Health Insurance in South Korea.

PurposeRapid growth of prescription drug expenditures is a problem in South Korea. The objective of this study was to assess the contributions of four variables (therapeutic choice, drug-mix, original use, and price changes) to increases in drug expenditures paid by the National Health Insurance (NHI) in Korea.Materials and MethodsA retrospective cohort study was conducted between January 1, 2008 and June 30, 2012 utilizing data from the NHI Claims Database of the Health Insurance Review and Assessment Service. The number of target drug types for final analysis was 13959. To analyze the growth rates of drug expenditures, this study used Fisher ideal index and the Laspeyres and Paasche indexes.ResultsWith the exception of 2012, therapeutic choice contributed to about 40–60% of the increase in drug expenditures every year, while drug-mix contributed to another 30–40%.ConclusionThe rapid growth in prescription drug expenditure was found to be largely due to drug-mix and therapeutic choice over time. Original use had little impact on drug spending.

Energy intensity: A decomposition and counterfactual exercise for Latin American countries

This paper investigates trends in energy intensity over the last 40years. Based on a sample of 75 countries, it applies the Fisher Ideal Index to decompose the energy intensity into the relative contributions of energy efficiency and economic structure. Then, the determinants of these energy indexes are examined through panel data regression techniques. Special attention is lent to Latin American countries (LAC) by comparing its performance to that of a similar set of countries chosen through the synthetic control method. When analyzed by income level, energy intensity has decreased in a range between 40 and 54% in low and medium income countries respectively. Efficiency improvements drive these changes, while the structural effect does not represent a clear source of change. The regression analysis shows that per capita income, petroleum prices, fuel-energy mix, and GDP growth are main determinants of energy intensity and efficiency, while there are no clear correlations with the activity component. In the case of LAC the energy intensity decreased around 20% which could be interpreted as an under-performance. However, the counterfactual exercise suggests that LAC has closed the gap with respect to its synthetic control.