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Analysing the Performance of Firms Using a Decomposable Ideal Index Number to Link Profit, Prices and Productivity

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  • John Salerian

Abstract

This article reviews an index number framework that links changes in aggregate performance measures (such as profit, revenue, cost and total factor productivity) to changes in both the prices and quantities of key outputs and inputs. The framework provides a way of linking the aggregate performance measures to outcomes for individual customer groups, employees and owners of businesses. This information is useful to policy makers in evaluating the outcomes of economic reform, including the distributional consequences. It is also useful to regulators who need to understand and monitor both the consequences of their regulation and the response to their decisions by those being regulated. The article demonstrates that the logarithmic version of Fisher's Ideal index offers a useful way of integrating changes in profit, productivity and prices into a single analysis. The usefulness of the framework is illustrated by applying it to a data set for Australian National.

Suggested Citation

  • John Salerian, 2003. "Analysing the Performance of Firms Using a Decomposable Ideal Index Number to Link Profit, Prices and Productivity," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 36(2), pages 143-155, June.
    • Handle: RePEc:bla:ausecr:v:36:y:2003:i:2:p:143-155
    DOI: 10.1111/1467-8462.00275
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    References listed on IDEAS

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    1. Fried, Harold O. & Lovell, C. A. Knox & Schmidt, Shelton S. (ed.), 1993. "The Measurement of Productive Efficiency: Techniques and Applications," OUP Catalogue, Oxford University Press, number 9780195072181.
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    Cited by:

    1. E. Grifell-Tatjé & C. Lovell, 2008. "Productivity at the post: its drivers and its distribution," Journal of Regulatory Economics, Springer, vol. 33(2), pages 133-158, April.
    2. Maziotis, Alexandros & Saal, David S. & Thanassoulis, Emmanuel & Molinos-Senante, María, 2016. "Price-cap regulation in the English and Welsh water industry: A proposal for measuring productivity performance," Utilities Policy, Elsevier, vol. 41(C), pages 22-30.
    3. Alexandros Maziotis & David S. Saal & Emmanuel Thanassoulis, 2012. "Profit, Productivity and Price Performance Changes in The English and Welsh Water and Sewerage Companies," Working Papers 2012.84, Fondazione Eni Enrico Mattei.
    4. Denis Lawrence & Anya Richards, 2004. "Distributing the Gains from Waterfront Productivity Improvements," The Economic Record, The Economic Society of Australia, vol. 80(s1), pages 43-52, September.
    5. Siew Hoon Lim & C.A. Knox Lovell, 2009. "Profit and productivity of US Class I railroads," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 30(7), pages 423-442.

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