Malmquist Productivity Index Decompositions: A Unifying Framework

In two widely cited but unpublished working papers, Simar and Wilson (1998) and Zofío and Lovell (1998) proposed an alternative decomposition of the Malmquist Productivity Index, which retained what seemed to be the strongholds of previous proposals with regard to the contribution of technological and efficiency change to productivity change. Namely, a technical change term with regard to the best practice (VRS) technology which is to be found in Ray and Desli (1997) and a scale efficiency change term that illustrates a firm’s situation with regard to optimal scale (benchmark technology), Färe, Grosskopf, Norris and Zhang (1994). Attaining this objective required the introduction of an additional term in the Malmquist Productivity Index decomposition, which would reflect the scale bias of technical change. It is our objective to provide economic rationale for this term within a theory of production context, the existing decompositions and recent articles that further elaborate on this issue. The ideas are illustrated using productivity trends in 17 OECD countriesProductivity Change; Malmquist Indices; Distance Functions

The multiregional core-periphery model: the role of the spatial topology

We use the multiregional core-periphery model of the new economic geography to analyze and compare the agglomeration and dispersion forces shaping the location of economic activity for a continuum of network topologies characterized by their degree of centrality, and comprised between two extremes represented by the homogenous (ring) and the heterogeneous (star) configurations. Resorting to graph theory, we systematically extend the analytical tools and graphical representations of the coreperiphery model for alternative spatial configurations, and study the stability of the alternative equilibria in terms of the sustain and break points. We study new phenomena such as the absence of any stable distribution of economic activity for some range of transport costs, and the infeasibility of the dispersed equilibrium in the heterogeneous space, resulting in the introduction of the concept pseudo flat-earth as a long run-equilibrium corresponding to an uneven distribution of economic activity between region

Return to Dollar, Generalized Distance Function and the Fisher Productivity Index

Exploring the duality between a return to dollar definition of profit and the generalized distance function we establish the relationship between the Laspeyres, Paasche and Fisher productivity indexes and their alternative Malmquist indexes counterparts. By proceeding this way, we propose a consistent decomposition of these productivity indexes into two mutually exclusive components. A technical component represented by the Malmquist index and an economical component which can be identified with the contribution that allocative criteria make to productivity change. With regard to the Fisher index, we indicate how researchers can further decompose the Malmquist technical component rendering explicit the sources of productivity change. We also show how the proposed model can be implemented by means of Data Envelopment Analysis techniques, and illustrate the empirical process with an example data set.Generalized Distance Function; Return to Dollar; Fisher and Malmquist Productivity Indexes

Environmental Policy Instruments: Technology Adoption Incentives with Imperfect Compliance

In this paper, we study the incentives to adopt advanced abatement technologies in the presence of imperfect compliance. Surprisingly, incentives to adopt advanced abatement technologies remain intact under emission taxes and pollution abatement subsidies when compared to the perfect compliance scenario. However, under emission standards imperfect compliance increases firms’ incentives to invest under certain assumptions, whereas under an emission permit mechanism investment incentives decrease only if widespread non-compliance induces a (sufficient) reduction in the permit price. Our results are valid for fairly general characteristics of the monitoring and enforcement strategies commonly found in both, theoretical and empirical applications.environmental policy; technology adoption; monitoring; non-compliance

Malmquist productivity index decompositions: a unifying framework

In two widely cited but unpublished working papers, Simar and Wilson (1998) and Zofío and Lovell (1998) proposed an alternative decomposition of the Malmquist Productivity Index, which retained what seemed to be the strongholds of previous proposals with regard to the contribution of technological and efficiency change to productivity change. Namely, a technical change term with regard to the best practice (VRS) technology which is to be found in Ray and Desli (1997) and a scale efficiency change term that illustrates a firm’s situation with regard to optimal scale (benchmark technology), Färe, Grosskopf, Norris and Zhang (1994). Attaining this objective required the introduction of an additional term in the Malmquist Productivity Index decomposition, which would reflect the scale bias of technical change. It is our objective to provide economic rationale for this term within a theory of production context, the existing decompositions and recent articles that further elaborate on this issue. The ideas are illustrated using productivity trends in 17 OECD countrie

The Directional Profit Efficiency Measure: On Why Profit Inefficiency is either Technical or Allocative

The directional distance function has been introduced in the efficiency literature with the intention of relaxing the fixed orientations represented by its classical input and output counterparts. However, the criteria underlying the choice of its associated directional vector are numerous. When market prices are observed and firms have a profit maximizing behavior, it seems natural to choose as directional vector that projecting inefficient firms towards profit maximizing benchmarks. Based on that choice of directional vector, we introduce the profit efficiency measure and show that, in this general setting, profit inefficiency can be categorized as either technical -for firms situating in the interior of the technology- or allocative -for firms lying on the frontier. We implement and illustrate the analytical model by way of Data Envelopment Analysis techniques, where the profit maximizing benchmark may not be unique, and introduce the necessary optimizing program for profit inefficiency measurement.Directional Distance Function; Profit Efficiency; Technical Efficiency; Allocative Efficiency; Data Envelopment Analysis.

A Panel Data Toolbox for MATLAB

Panel Data Toolbox is a new package for MATLAB that includes functions to estimate the main econometric methods of panel data analysis. The package includes code for the standard fixed, between and random effects estimation methods, as well as for the existing instrumental panel and new spatial panel. This paper describes the methodology and implementation of the functions and illustrates their use with well-known examples. We perform numerical checks against other popular commercial and free software in order to show the validity of the result

Urban patterns, population density and optimal city dimension: The case of public infrastructure

Determination of the optimal city size underlies the economic rationality of infrastructure provision by local governments. We investigate the existence of decreasing average costs resulting from economies of scale, associated with larger urban dimensions in terms of population and housing, and economies of density, brought about by reductions in urban dispersion, and calculate optimal population densities when providing basic infrastructure. The methodology relies on novel definitions of scale and density economies and their estimation by way of flexible translog cost functions, extensively applied in the literature dealing with the provision of services—i.e., utilities, but extended here to their supporting infrastructure. Our results unveil the existence of latent economies of scale and density resulting in a cost excess in the provision of infrastructure due to the effect of urban sprawl that translates into suboptimal city sizes. Based on these findings several policy guidelines rationalizing urban development are suggested. The model is illustrated using Spanish statistical data collected from the nationwide local infrastructure and equipment survey, and prices from a new database that uses engineering cost benchmarks.Urban patterns; Optimal urban density; Scale and density economies; Translog cost function.

On the inconsistency of the Malmquist-Luenberger index

Apart from the well-known weaknesses of the standard Malmquist productivity index related to infeasibility and not accounting for slacks, already addressed in the literature, we identify a new and significant drawback of the Malmquist-Luenberger index decomposition that questions its validity as an empirical tool for environmental productivity measurement associated with the production of bad outputs. In particular, we show that the usual interpretation of the technical change component in terms of production frontier shifts can be inconsistent with its numerical value, thereby resulting in an erroneous interpretation of this component that passes on to the index itself. We illustrate this issue with a simple numerical example. Finally, we propose a solution for this inconsistency issue based on incorporating a new postulate for the technology related to the production of bad output

Environmental Efficiency Measurement with Translog Distance Functions: A Parametric Approach

We use a flexible parametric hyperbolic distance function to estimate environmental efficiency when some outputs are undesirable. Cuesta and Zofio (J. Prod. Analysis (2005), 31-48) introduced this distance function specification in conventional input-output space to estimate technical efficiency within a stochastic frontier context. We extend their approach to accommodate undesirable outputs and to estimate environmental efficiency within a stochastic frontier context. This provides a parametric counterpart to Färe et al.’s popular nonparametric environmental efficiency measures (Rev. Econ. Stat. 75 (1989), 90-98). The distance function model is applied to a panel of U.S. electricity generating units that produce marketed electricity and non-marketed SO2 emissions.Undesirable outputs; parametric distance functions; stochastic frontier analysis; environmental efficiency