Factor Productivity Measures Research Articles

Bridging the Gap between Partial and Total Factor Productivity Measures Using Directional Distance Functions

Technical dependencies as well as data constraints limit our ability to allocate inputs across sectors and hence our ability to measure sectoral productivity. We adapt a directional measure of efficiency to the measurement of sector‐specific productivity that does not require allocating all inputs across sectors. Applied to the agricultural sector of a group of countries, the results show important differences in livestock and crops productivity growth. Commonly used partial factor productivity measures for livestock and crops tend to overestimate productivity growth in most developing countries while underestimating it in European countries.

Economic assessment of technological change and land degradation in agriculture: application to the Sri Lanka tea sector

Productivity change is an important potential aspect of technological change, so that productivity measurement plays a crucial role in assessing the effects of technological change in agriculture. This study contributes to an understanding of total factor productivity change by assessing the extent and nature of such change for the Sri Lankan tea industry over the period 1960–1995. The total factor productivity measures are then used to define a conceptually sound measure of the production cost of land degradation, providing insight into the scarcity of soil in the tea sector. Based on the theoretical relationship of the impact of technological progress and land degradation on tea production, a regression model is fitted to decompose the total factor productivity variable. Technological change, when the study period as a whole is considered, produced cost savings, rather than output increases. Tea output levels have been maintained, despite significant decreases in total inputs. On the basis of available data and the chosen model, it could be concluded that the positive impact of technological progress has outweighed the negative effect of land degradation in Sri Lanka's tea sector, over the study period. The study highlights the systems aspect of analysis into the productivity and land degradation issues in agriculture.

The global trends of total factor productivity: evidence from the nonparametric Malmquist index approach

In this paper the Malmquist index of total factor productivity is applied to a sample of 87 countries observed over the period 1960-90. This index and the method needed to quantify it, the data envelopment analysis, has substantial advantages as compared to traditional growth accounting. Two of these advantages are that it does not rely on questionable equilibrium assumptions to merge multiple inputs into a single index and that the rate of total factor productivity growth can explicitly be decomposed into a measure of efficiency change and the rate of technological progress. Results are reported both in the form of growth rates and measures of relative productivity levels. In each case related labour productivity measures are calculated and the differences to the total factor productivity measures are analysed. Among the topics covered are the productivity slowdown, the Asian Miracle and the bimodality of the distribution of relative producitivity levels. JEL classification: C14, O33, O47

A stochastic frontier approach to total factor productivity measurement in Bangladesh crop agriculture, 1961–92

AbstractThis paper applies a stochastic production frontier model to measure total factor productivity growth, technical efficiency change and technological change in Bangladesh crop agriculture for the 31 observations from 1960/61 to 1991/92, using data for 16 regions. The results reveal that technical change followed a U‐shaped pattern, rising from the early 1970s, when the green revolution varieties were adopted, giving an overall rate of technical progress at 0.27 per cent per year. However, technical efficiency declined throughout, at an estimated annual rate of 0.47 per cent. The combined effect of slow technical progress, dominated by the fall in technical efficiency resulted in total factor productivity (TFP) declining at a rate of 0.23 per cent per annum, with the rate of decline increasing in the later years. TFP change is shown to depend on the green revolution technology and agricultural research expenditures. Copyright © 2003 John Wiley & Sons, Ltd.

Who is to Blame? Canadian Manufacturers and the Absence of Income Per Capita Convergence

No significant convergence between Canadian and American income per capita occurred during the first ninety years of the twentieth century. This lack of convergence does not appear to have been due to technological dependence, input price distortions, or diseconomies of scale within the Canadian manufacturing sector. The evidence presented in this paper is based on total factor productivity measurement, statistical testing, and counterfactual experimentation using data from national statistical agencies and firm-level sources.

Sense and sustainability revisited: the limits of total factor productivity measures of sustainable agricultural systems

AbstractMany economists have advocated and applied total social factor productivity (TSFP) (i.e., total factor productivity estimated with both market and non‐market inputs and externalities, and with all factors valued at social prices) as a single all‐embracing measure of agricultural sustainability. This paper reviews the conceptual and practical issues in measuring TSFP and shows that no one measure alone will be theoretically or empirically robust as an indicator of sustainability. TSFP is a conceptually flawed measure since inclusion of non‐market inputs and outputs and social price‐based valuation, in most cases, violates the theoretical basis underlying those estimates. Trends in TSFP also have limited value in diagnosing the nature of sustainability problems, unless changes in productivity are related to underlying changes in technology, human and physical infrastructure, and indicators of resource quality.More attention needs to be given to defining key indicators of agro‐ecosystem health and relating these measures to trends in productivity. This analysis must be sufficiently disaggregated and for a long enough time period to allow for spatial and temporal variability inherent in agricultural production. Secondary data at the district level on both conventional inputs and outputs and resource quality have recently allowed more quantitative estimates of sustainability and its causes. With limited data, yield growth decomposition analysis can often be used to provide valuable insights into sustainability problems. Meanwhile, there is a need to invest in long‐term experimental and panel surveys of farmers and their fields for key production systems in order to provide long‐term data that will allow full productivity accounting, using more formal statistical procedures. Regardless of the approach selected, the findings of this paper strongly suggest a need for economists, agronomists and soil scientists to collaborate in integrating approaches in order to provide more robust and informative measures of sustainability.

Sense and sustainability revisited: the limits of total factor productivity measures of sustainable agricultural systems

Many economists have advocated and applied total social factor productivity (TSFP) (i.e., total factor productivity estimated with both market and non-market inputs and externalities, and with all factors valued at social prices) as a single all-embracing measure of agricultural sustainability. This paper reviews the conceptual and practical issues in measuring TSFP and shows that no one measure alone will be theoretically or empirically robust as an indicator of sustainability. TSFP is a conceptually flawed measure since inclusion of non-market inputs and outputs and social price-based valuation, in most cases, violates the theoretical basis underlying those estimates. Trends in TSFP also have limited value in diagnosing the nature of sustainability problems, unless changes in productivity are related to underlying changes in technology, human and physical infrastructure, and indicators of resource quality. More attention needs to be given to defining key indicators of agro-ecosystem health and relating these measures to trends in productivity. This analysis must be sufficiently disaggregated and for a long enough time period to allow for spatial and temporal variability inherent in agricultural production. Secondary data at the district level on both conventional inputs and outputs and resource quality have recently allowed more quantitative estimates of sustainability and its causes. With limited data, yield growth decomposition analysis can often be used to provide valuable insights into sustainability problems. Meanwhile, there is a need to invest in long-term experimental and panel surveys of farmers and their fields for key production systems in order to provide long-term data that will allow full productivity accounting, using more formal statistical procedures. Regardless of the approach selected, the findings of this paper strongly suggest a need for economists, agronomists and soil scientists to collaborate in integrating approaches in order to provide more robust and informative measures of sustainability.

The myth of large farm superiority: Lessons from agricultural transition in poland*

In Poland, larger farms are often actively promoted over small farms. This policy is based on the perception that there are economies of scale that favor large farms; however, this is contrary to international evidence, which generally indicates that larger farms are less efficient and use less labor than smallscale family farms. Using both total factor productivity measures and data envelopment analysis, empirical findings from Poland suggest that larger farms are no more efficient than smaller farms, and smaller farms are relatively more labor-intensive. These results have important policy implications for farm restructuring in Poland and other transition economies.

Total factor productivity measures for Telstra

Using the Divisia indexation procedure to construct output and input indices for Telstra, this study estimated total factor productivity (TFP) growth rates for the period, 1980–1997. The study reveals that Telstra's TFP growth rates were significantly higher in the post-reform period compared to the pre-reform period. The study further reveals that the terms of trade for Telstra, defined as the ratio of output prices received and input prices paid by Telstra, has declined more sharply in recent years. This reflects Telstra's endeavour, under the competitive pressure, to share productivity gains with consumers.

Stochastic Technical Change and Procyclical TFP The Case of Italian Agriculture

The paper questionsthe use of Total Factor Productivity (TFP) measures as a proxyfor the technological level in Italian agriculture. TFP growthreveals a cyclical behaviour and a short-run component due toshocks on both the demand and supply sides. In order to identifyreal long-run technological change, a Kalman filter procedureis applied to a stochastic process depicting the generation oftechnical change induced by R&D and Extension expenditure.The empirical evidence reveals that short-term shocks greatlyaffect the traditional measure of productivity. A better indicatorof technological progress can be obtained by estimating the long-runcomponent of productivity, which seems to be significantly inducedby R&D-Extension public expenditure.

Total factor productivity measurement and human capital in OECD countries

This paper analyses the Total Factor Productivity (TFP) evolution in OECD countries by breaking down productivity gains into technical change and efficiency change. To avoid biases, Malmquist indices of productivity, including human capital, are estimated. The results indicate that, in fact, the inclusion of human capital has a significant effect on the accurate measurement of TFP.

Productivity dynamics: U.S. manufacturing plants 1972-1986

This paper presents an analysis of the dynamics of total factor productivity measures for large plants in SICs 35, 36 and 38. Several TFP measures, derived from production functions and Solow type residuals, are computed and their behavior over time is compared, using non-parametric tools. Aggregate TFP, which has grown substantially over the time period, is compared with average plant level TFP, which has declined or remained flat. Using transition matrices, the persistence of plant productivity is examined, and it is shown how the transition probabilities vary by industry, plant age, and other characteristics. This paper describes the results of investigations into the dynamics of total factor produc- tivity (TFP) in large manufacturing plants in high-tech industries from 1972 through 1986. In this paper we build on the work of Dhrymes (1991) and compare econometric with Solow-type measures of TFP. We try to answer fundamental questions regarding the move- ment of plants within the cross sectional distribution of productivity, as time progresses: If productivity in the aggregate improves, does that mean that the constituent plants (for this aggregate) share, nearly uniformly, in this improvement? Does plant level productivity improve steadily over time? Do plants move up or down the productivity rank in complete jumps? Is there a tendency for plants to converge, in their productivity characteristics, either towards the best or worst practice plants, or towards the mean? We present evidence on nearly all of these issues, viz., aggregate versus (plant) average productivity behavior, * The views expressed herein are solely the authors' and do not necessarily reflect those of the Board of Governors of the Federal Reserve System or its staff. This paper was originally written in the summer of 1991 and was presented in the NBER summer workshop (Cambridge) summer of 1991, the summer meeting of the ASA (Boston) in the summer of 1992, and the December meetings of the AEA. We wish to thank the staff and visiting researchers at the Center for Economic Studies, U.S. Bureau of the Census, for providing a stimulating research environment. We would also like to thank two anonymous referees, participants of the NBER Summer '91 workshop, the summer (1992) meetings of the ASA, and the December (1993) meetings of the AEA for valuable comments and suggestions.

Research and Productivity in Mexican Agriculture

AbstractPartial and total factor productivity (TFP) measures of Mexican agriculture are calculated for 1960–90. The long‐run effects of research and international transfer of technology on TFP are examined over the 1940‐90 period using cointegration procedures. TFP increased at an average annual rate of 2.5%, exceeding the corresponding growth in the United States (2.1%). TFP grew particularly fast in the 1960s and 1970s. A 1% rise in research investment increased TFP by 0.13%, and a 1% increase in U.S. TFP translated into a 1.11% increase in Mexican TFP. The average annual rate of return to research investment is about 64%.

Wage Bargaining and the Efficiency Dividend in Public Enterprises

AbstractAn important aspect of the process of microeconomic reform is the improved operational efficiency of public trading enterprises. This paper argues the importance of appropriately distributing the efficiency dividend amongst the key players including the owners (ie., Governments which expect greater dividends), producers of the output (ie., workers and management who expect greater wages and salaries) and consumers (who expect better quality output at lower prices). The paper first evaluates the currently available measures of the efficiency dividend in public enterprises, including factor productivity and performance indicators. It then demonstrates that inappropriate use of these measures by management and/or workers during the wage bargaining process can lead to misunderstanding of the extent of the dividend and how it should be distributed. This in turn can undermine the reform process. Amongst the conclusions reached are that single factor productivity measures should not be used during the wage bargaining process.

Slack and performance in health care delivery

Improving quality and productivity simultaneously is vital to organizational competitiveness. Although continuous improvement is accepted as the objective for world class competition, it is not clear as to which interventions achieve the best performance, which variables intervene by enhancing or restricting the achievement of high quality and productivity, or which measures are appropriate for evaluating differences. Develops a quality evaluation tool and total factor productivity measures for health care clinics. Uses data envelopment analysis (DEA) to discriminate between high and low slack groups. Finds that hypothesized relationships and interactions between quality, productivity, and slack generally have statistically insignificant differences, exceptions being that health care consumers were able to identify characteristics of high and low quality care as well as health care professionals and that health care quality can increase with no decline in productivity when there is high‐slack. In general, high‐slack clinics could increase quality or productivity, but not both.

Beyond “Miracles” and Total Factor Productivity: The Singapore Experience

Neither neoclassical nor new growth theories have satisfactorily explained the growth phenomenon observed in East Asia. Paul Krugman's depiction of East Asian economies as sausage makers based on Alwyn Young's measures of total factor productivity (TFP) has brought about a contrarian view to the East Asian miracle. The prognosis from dismal TFP growth implies that economies like Singapore will slow down as its reserves of factor inputs are exhausted. We observe that adaptative factor improvements often missed out in measure ment of factor productivity may have led to an oversimplification of growth by perspira tion rather than by inspiration. A more insightful reworking of growth data in Singapore suggests that Krugman fs thesis may have been overly pessimistic. Comparisons drawn with Hong Kong in particular are misleading as the two city-states are quite unlike in many aspects. In the final analysis, Singapore's growth prospects can be maintained. Higher factor productivity and a more matured economy underpinned by continued sound economic policies and regional stability are the most crucial considerations.

The impact of environmental regulation on productivity in German industries

The objective of this paper is to adjust a traditional total factor productivity (TFP) measure for the direct effect of environmental regulation on material and capital input. For this purpose we consider the fact that part of material input and pollution abatement capital have not been used to increase output but to cover the cost of using the environment as a factor of production. Therefore TFP growth rates are lower if part of the material input is allocated to abatement activities instead of producing output. We propose to treat compliance with environmental regulation as an unproductive input linked to the use of productive material input. Our aim is to answer and discuss two questions: How to measure the effect of environmental regulation on TFP, and does the effect matter. We examine data from 1975–1991 for ten pollution intensive German industries.

Productivity in the pulp and paper industries of the United States and Canada: a nonparametric analysis

Partial and total measures of factor productivity are presented for the pulp and paper industries of the United States and Canada, from 1959 to 1987. Total factor productivity was measured with (1) a Tornqvist–Theil index, (2) a nonparametric index with translating hypothesis, and (3) a nonparametric index with distance functions. Method 1 implied a constant return to scale translog production function. Methods 2 and 3 removed any assumption on the functional form of the production function. Furthermore, method 3 allowed for fully disaggregated outputs. Methods 1 and 3 gave similar results within countries: an increase in total factor productivity of 0.7% per year in the United States and of 0.5% per year in Canada. Method 2 gave rates of growth of total factor productivity that were twice as high, but unreliable because of the assumptions of the method. From 1961 to 1984, when comparable data are available, methods 1 and 3 gave growth rates of total factor productivity that were significantly higher, statistically, in the United States than in Canada. Nevertheless, the differences seem to be too small to be of economic significance.

The productivity effects of the liberalization of Japanese telecommunication policy

In the early 1980s, the Japanese government decided to pursue policies of liberalization that opened Japan's telecommunication market to competition and moved toward the privatization of Nippon Telegraph and Telephone (NTT), the dominant domestic telecommunication service provider. The purpose of this paper is to assess the effects of liberalization on the productive performance of NTT. To assess the productive consequences of liberalization, we first provide basic productivity measures for NTT. The Total Factor Productivity (TFP) measures are then decomposed to separate out the effects of liberalization from other factors such as scale, technology, and capacity utilization. The TFP decomposition is based on the parameter estimates of a dynamic cost model.

Measuring technological change using a latent variable approach

The state of technology is an unobservable variable in transformation functions. The study introduces a latent variable structural equation approach to modelling technological change in US agriculture. The proposed approach combines the parametric production (cost) function and the discrete total factor productivity index approaches together and minimises measurement errors. The technological change for the US agriculture is assumed to be caused by agricultural research, extension, and the farmers' educational backgrounds. The results are compared with the conventional total factor productivity measurement and show that the estimated technology index has a higher annual growth rate than the discrete total-factor-productivity index estimates