A superlative index number formula for the Hicks-Moorsteen productivity index

The Malmquist and Hicks-Moorsteen productivity indexes are the two most widely used theoretical indexes for measuring productivity growth. Since these productivity indexes are defined by unknown distance functions, it is necessary to estimate the distance functions to compute them in principle. On the other hand, the Törnqvist productivity index is an empirical index number formula that is directly computable from the prices and quantities of the inputs and outputs alone. Caves et al. (1982) imply that the Malmquist index coincides with the Törnqvist index under profit maximizing behaviour and constant returns to scale technology. The purpose of the present paper is to point out that the Hicks-Moorsteen productivity index coincides with the Törnqvist productivity index under the same condition. We emphasize that the condition of constant returns to scale is indispensable for deriving the equivalence between the two indexes. Moreover, even when this condition is relaxed to the α returns to scale, the equivalence between the Hicks-Moorsteen and Törnqvist productivity indexes is shown to hold true.     

Public sector productivity: the sensitivity of productivity indexes to alternative output measures and index number formulas

Focusing on a specific government agency, the Internal Revenue Service, and using publicly available data for the years 1956–1982, this article investigates two issues. First, because government agencies produce services which, in general, are not sold in markets, the appropriate measure and weighting of outputs is not obvious. Thus, it is of interest to know how sensitive an index of labor productivity is to the way in which output is measured. Second, in computing labor productivity, an index number formula must be selected. Dispersion among the index numbers is not uncommon, making the choice among formulas an important issue. Results indicate that the choice of both the output measure and index formula are important.The refereeing process of this paper was handled through F. Førsund.     

A look at productivity at the firm level in eight French service industries

In this paper, we take advantage of information collected by the French annual survey of market services to analyze productivity differences and changes among firms in eight major industries (restaurants, hotels, engineering, computer programming, computer processing, legal services, accounting and building cleaning), over the five-year period 1984–1988. We find a pattern of cross-sectional and time-series type estimates of the Cobb-Douglas production function, which is comparable to that typically found in studies of manufacturing industries, thus raising similar issues of interpretation and modeling. Using a capital stock measure corrected for rented equipment and building and taking into account the number of hours of work of work per employee improve these estimates to some extent. An interesting finding is that the output elasticity seems significantly smaller with respect to hours per employee than with respect to the number of employees.     

Efficiency and total factor productivity of crop production at NUTS1 level in Turkey: Malmquist index approach

Fundamental components of the economy in developing countries are efficiency and productivity. These concepts prevail all around the world and many studies have been conducted on the issue. With the rapidly increasing population, productivity and efficiency of the agricultural sector have become even more important in order to meet the food needs of the population. In this study, NUTS (The Nomenclature of Territorial Units for Statistics) regions in Turkey were accepted as an decision making unit and the efficiency values of these regions, changes in the total factor productivity and technology were calculated for the 10-year period covering 1994–2003. Methods of Data Envelopment Analysis and Malmquist Productivity Index were used in order to measure the crop production of NUTS1 regions in Turkey. There has been a decrease in the technical efficiency and total factor productivity in the regions, excluding the Western Marmara, the Aegean, the Mediterranean and The Eastern Blacksea Region, within the 10 year period analyzed. The decrease reflected all over the country. The decrease was caused by the fact that the real price level remained the same; the real prices of the inputs increased despite the decreasing population economically active in the agricultural sector, and the difficulty experienced in integration of the latest technology to the agricultural sector. Regional differences in terms of productivity and efficiency is another striking finding.     

The Organizational Innovation System: A systemic framework for radical innovation at the organizational level

Most research on innovation management at the organizational level has typically been focused on one specific innovation project phase or innovation management concept. This has resulted in many valuable insights, though scattered in different (innovation) research fields and studies. With the development of the Organizational Innovation System (OIS), we bring together important insights from the Innovation Systems, Open Innovation and other related fields into a guiding concept useful for both innovation managers developing (radical) innovations and innovation scholars. In this paper, we define the OIS and its key structural components, and discuss the identified functions and categories of potential imperfections. With the OIS, we provide a holistic, hands-on concept currently lacking in the open innovation approach. From the conceptualization, a framework for analysis is put forward which provides structure to the study of ongoing and finished innovation processes. Additionally, the development of the OIS is a first step in the development of a currently underdeveloped micro-level within the innovation systems perspective. The insights in OISs and the future insights derived from analytical efforts, will not only be beneficial for the performance of innovating organizations and organizational innovation systems but also for the performance of the higher, interconnected system levels.     

Forecasting the Malmquist productivity index

The Malmquist Productivity Index (MPI) suggests a convenient way of measuring the productivity change of a given unit between two consequent time periods. Until now, only a static approach for analyzing the MPI was available in the literature. However, this hides a potentially valuable information given by the evolution of productivity over time. In this paper, we introduce a dynamic procedure for forecasting the MPI. We compare several approaches and give credit to a method based on the assumption of circularity. Because the MPI is not circular, we present a new decomposition of the MPI, in which the time-varying indices are circular. Based on that decomposition, a new working dynamic forecasting procedure is proposed and illustrated. To construct prediction intervals of the MPI, we extend the bootstrap method in order to take into account potential serial correlation in the data. We illustrate all the new techniques described above by forecasting the productivity index of 17 OECD countries, constructed from their GDP, labor and capital stock.     

Modeling technical progress and total factor productivity: A plant level example

Shifts in the production frontier occur because of changes in technology. A model of how a firm learns to use the new technology, or how it adapts from the first production frontier to the second, is suggested. Two different adaptation paths are embodied in a translog cost function and its attendant cost share equations. The paths are the traditional linear time trend and a learning curve. The model is estimated using establishment level data from a non-regulated industry that underwent a technological shift in the time period covered by the data. The learning curve resulted in more plausible estimates of technical progress and total factor productivity growth patterns. A significant finding is that, at the establishment level, all inputs appear to be substitutes.This paper was processed by N.R. Adam.     

Time precedence in the relationship between organizational climate and organizational performance: a cross-lagged study at the business unit level

This article presents a two-wave cross-lagged study (average interval of two years) on time precedence in the relationship between organizational climate and organizational performance in 171 branches of a financial services organization in the Netherlands. It is argued that four HR-induced organizational climate dimensions influence organizational performance. Additionally, it was also hypothesized that high organizational performance influences the four organizational climate dimensions through investments in HR practices and through signalling effects. Finally, it was reasoned that possibly both processes are present simultaneously. Results of testing a series of competing models in AMOS showed that organizational climate at time point 1 influenced organizational performance at time point 2 rather than the reverse, or both processes being present simultaneously.     

Uncertainty and the measurement of productivity

The purpose of this paper is to provide an empirically implementable framework for the analysis of the effects of uncertainty on firm behavior. In particular, the paper provides a model which can be used to calculate productivity growth for firms facing uncertainty and to decompose the growth in total factor productivity into its various components. It can also be used to identify the contributions of uncertainty and risk aversion.Applying the model to the U.S. textile industry, we find that price uncertainty had a small effect on productivity growth.The refereeing process of this paper was handled through M. Brown.     

Applying efficiency measurement techniques to the measurement of productivity change

Deterministic frontier analysis (DFA), stochastic frontier analysis (SFA), and data envelopment analysis (DEA) are alternative analytical techniques designed to measure the efficiency of producers. All three techniques were originally developed within a cross-sectional context, in which the objective is to compare the efficiencies of producers. More recently all three techniques have been extended for use in a panel data context. In the latter context it is possible to measure productivity change, and to decompose measured productivity change into its sources, one of which is efficiency change. However when efficiency measurement techniques, particularly SFA, have been applied to panel data, it has infrequently been made clear what the objective of the analysis is: the measurement of efficiency, which may vary through time as well as across producers, or the measurement and decomposition of productivity change. In this paper I explore the use of each technique in a panel data context. I find DFA and DEA to have achieved a more satisfactory reorientation toward productivity measurement than SFA has.     

Understanding pension communications at the organizational level: Insights from bounded rationality theory & implications for HRM

This paper applies concepts from bounded rationality theory to develop an integrative model to understand how pension scheme structure and pension scheme communication impact pension participation and contribution rates at organizational level. Organizational pension policies create framing effects that can have intended and unintended consequences depending on how they impact on employees' cognitive processes. Organizational pension communication policy impacts employee pension outcomes through the interaction between fast-acting, automatic System 1 and deliberative, calculating System 2 that typically endorses and occasionally overrides System 1 judgments. System 1 exhibits mental short-cuts (heuristics) and systematic biases. The likelihood of a System 2 challenge to System 1 depends on the personal, socio-demographic and economic characteristics of the individuals within the workforce. We propose that those within the HR function, who understand framing effects, can develop pension policies that positively affect pension plan outcomes at the organization level, specifically the pension participation and average contribution rates, using a combination of policies that in some cases promote System 2 endorsement and in other cases, System 2 engagement.     

Research productivity patterns in the organizational behavior and human resource management literature

Closely following the analysis approach used for similar studies in the economics and finance literature, we present the first study to examine if there exists an empirical regularity in the bibliometric patterns of research productivity in the organizational behavior (OB) and human resource management (HRM) literature. Our results present strong evidence that there indeed exists a distinct empirical regularity. It is the so-called Generalized Lotka's Law of scientific productivity pattern: The number of authors publishing n papers is about 1/n^c of those publishing one paper. The observed pattern in the OB and HRM area is interestingly very consistent with those in much older, related business disciplines.     

Evaluating change in European industrial relations: research evidence on trends at organizational level

This paper uses evidence from organizations with more than 200 employees in several countries across Europe to explore the proposition that industrial relations in Europe is becoming more convergent around a non-union HRM model. The evidence indicates that, although there are some similar moves taking place, national patterns remain distinctive, the IR/HRM distinction may not be sustainable in Europe and there are significant elements of continuity in industrial relations in Europe alongside the changes that are taking place.     

New techniques in the measurement of multifactor productivity

This article outlines procedures for adjustment for characteristics of the production structure which are typically ignored in productivity growth computations but affect the correct valuation of inputs and outputs. There are many such characteristics, including changes in the terms of trade and fixity of factors, but only one appears to have much impact on productivity fluctuations: imperfect competition in output and input markets. To illustrate this, traditional and adjusted productivity growth indexes based on assumed markups are constructed for the U.S., Canadian and Japanese business sectors for comparison with each other and with other adjustments done in previous studies. The methodology is based on finding shadow values of all domestic and traded outputs and inputs to use to evaluate the contribution of each to profits. We find that evidence of markups suggests adjustments in traditional measures that are quite significant and which tend to smooth both cyclical and time trends in productivity growth.The refereeing process of this paper was handled through M. Denny.     

The measurement of productivity in the nonmarket sector

In many sectors of the economy, governments either provide various services at no cost or at highly subsidized prices. Examples are the health, education and general government sectors. The System of National Accounts 1993 recommends valuing these nonmarket outputs at their costs of production but it does not give much guidance on exactly how to do this. In this paper, an explicit methodology is developed that enables one to construct these marginal cost prices. However, in the main text, an activity analysis approach is taken in order to simplify the analysis, so in particular, constant returns to scale, no substitution production functions for the specific activities in the nonmarket sector are assumed. It is shown that it is possible to obtain meaningful measures of Total Factor Productivity growth in this framework. An “Appendix” relaxes some of the restrictive assumptions that are used in the main text.     

Secondary products and the measurement of productivity growth

The paper considers alternative treatments of secondary products in input-output systems and analyzes their implications for the measurement of productivity growth at both the sectoral and overall level. Two standard models of secondary products are used: (1) the commodity technology model and (2) the industry technology model. It is argued that the first model correctly relates sectoral and overall levels of productivity growth; the second model, though more conventional, aggregates sectoral levels to a biased estimate of overall productivity growth. Estimates of the two measures are provided using U.S. 85-sector input-output data for 1967, 1972, and 1977. The empirical results indicate that the alternative assumptions do not lead to significantly different estimates of commodity-level and industry-level productivity growth over this period for the full economy but do for several sectors. Moreover, changes in secondary production did not contribute significantly to the decline in productivity growth over this period but secondary production was found to have a much lower rate of productivity growth than primary production.     

Certified and uncertified skills and productivity growth performance: Cross-country evidence at industry level

We analyse the relationship between human capital and productivity growth using a five-country multi-industry dataset together with a measure of human capital which accounts for both certified skills (educational qualifications) and uncertified skills acquired through on-the-job training and experience. We find evidence of positive human capital effects on growth in average labour productivity, particularly when using our composite human capital measure. We also find some tentative evidence that multi-factor productivity (MFP) growth is positively related to the use of high-skilled labour. However, externalities of this kind are largely confined to industries which make intensive use of university graduates.     

Cost Malmquist productivity index: an output-specific approach for group comparison

The cost Malmquist productivity index (CMPI) has been proposed to capture the performance change of cost minimizing Decision Making Units (DMUs). Recently, two alternative uses of the CMPI have been suggested: (1) using the CMPI to compare groups of DMUs, and (2) using the CMPI to compare DMUs for each output separately. In this paper, we propose a new CMPI that combines both procedures. The resulting methodology provides group-specific indexes for each output separately, and therefore offers the option to identify the sources of cost performance change. We also define our index when input prices are not observed and establish, in that case, a duality with a new technical productivity index, which takes the form of a Malmquist productivity index. We illustrate our new methodology with a numerical example and an application to the US electricity plant districts.     

Exact decomposition of the Fisher ideal total factor productivity index

Decompositions of total factor productivity (TFP) shed light on the driving factors behind productivity change. We develop the first exact decomposition of the Fisher ideal TFP index which contains no debatable mixed-period components or residuals. We systematically isolate five effects of (1) technical change, (2) technical efficiency, (3) scale efficiency, (4) allocative efficiency, and (5) price effect. The three efficiency components (2–4) represent the efficiency of achieving a given target point. Components (1) and (5) capture the changes of the target point. While the technical change component is well-established, changes in the relative input–output prices can have real effects on the scale and scope of the target. Such changes are captured by the new price effect component (5). The new decomposition is compared with existing decompositions both in theory and by means of an empirical application to a panel data of 459 Finnish farms in years 1992–2000.

Errors of measurement and the recent acceleration in manufacturing productivity growth

Using detailed (4-digit SIC) industry data for the years 1958–1989, I examine whether the recent acceleration in manufacturing productivity can be attributed to the effects of mismeasurement of the prices of inputs and output, by testing a model linking a set of proxy variables for measurement error to a series of measures of acceleration in total factor productivity (TFP). Alternative TFP estimates are presented in order to determine if the findings are sensitive to the method of TFP calculation. The results are inconsistent with the measurement error hypothesis and invariant to the specification of the TFP equation.