The Malmquist Total Factor Productivity Index

Abstract

The definitions of the Malmquist output and input quantity indexes specified by D. W. Caves, L. R. Christensen, and W. E. Diewert (1982) are applied in this study. Based on these indexes, a 'Malmquist total factor productivity index' is derived for general production structures. The definition maintains the fundamental characteristic of a productivity index as a ratio between an output quantity change index and an input quantity change index. This index provides a remedy for the shortcoming of the traditional definition of the Malmquist productivity index in that the latter does not correctly measure changes in productivity in the presence of changes in returns to scale. Copyright 1996 by The editors of the Scandinavian Journal of Economics.

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