Nonparametric Estimates of the Components of Productivity and Profitability Change in U.S. Agriculture

Abstract

Recent theoretical advances in total factor productivity (TFP) measurement mean that TFP indexes can now be exhaustively decomposed into unambiguous measures of technical change and efficiency change. To date, all applications of this new methodology have involved decomposing indexes that have poor theoretical properties. This article shows how the methodology can be used to decompose a new TFP index that satisfies all economically-relevant axioms from index theory. The application is to state-level data from 1960 to 2004. In most states, the main drivers of agricultural TFP change are found to have been technical change and scale and mix efficiency change.

Agricultural Productivity Growth and the Role of Capital in South Asia (1980–2013)

“…Both Coelli and Rao [46] and Shahabinejad and Akbari [47] applied Data Envelopment Analysis (DEA) and estimated Malmquist productivity indices to drive technical efficiency, technological and TFP changes. Although Malmquist index is widely used in the literature, this index generally produces biased measure of TFP change except in cases when technology exhibits constant returns to scale (CRS) and inverse homotheticity [20,[48][49][50] [52]. Both Avila and Evenson [51] and Fuglie [52] did not decompose TFP further to any of its associated efficiency measures and hence provided limited information on the drivers of growth.…”

“…Second, the indices are computed using simple index methods (i.e., Malmquist index, growth accounting, etc. ), which are biased as they fail to satisfy transitivity as well as axioms of the index number theory [20,[48][49][50]. Third, most of these multi-country studies did not decompose the components of TFP growth, which can shed light on the actual contributions of each of the associated efficiency measures to total TFP.…”

“…TFP efficiency change can be further decomposed into technical, scale and mix efficiency changes. In this study, we employed this methodology proposed by O'Donnell [48,62] which is summarized in the following section.…”

“…The residual output-oriented scale efficiency (ROSE) is defined as the ratio of TFP at a technically and mix-efficient point to the possible maximum TFP, and the residual mix efficiency (RME) is the component that remains after accounting for the effects of pure technical and pure scale efficiency changes [48].…”

Measuring productivity change in higher education: an application of Hicks–Moorsteen total factor productivity index to Malaysian public universities

“…Some of the main applications of this index are O'Donnell (2010a;2012a;2012b) in the context of the agricultural sector, Simões and Marques (2012) in the waste sector andEpure et al (2011), andArjomandi (2012;2014) in the banking sector.…”