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The measurement of productive performance with consideration for allocative efficiency

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  • Zhao, Yu
  • Morita, Hiroshi
  • Maruyama, Yukihiro

Abstract

We propose a profit ratio (the ratio of revenue to expenses) change index, which can be applied to panel data to measure productivity growth and suitable for situations when producers desire to maximize revenue and minimize expenses simultaneously. To identify the drivers of changes in a profit ratio change index, we decompose the index into profit ratio efficiency change and change of profit ratio boundary. We also propose an alternative decomposition of the profit ratio change index, which is the product of the Malmquist input-oriented productivity index and an allocation Malmquist productivity index. We demonstrate the method on a Japanese banking data set.

Suggested Citation

  • Zhao, Yu & Morita, Hiroshi & Maruyama, Yukihiro, 2019. "The measurement of productive performance with consideration for allocative efficiency," Omega, Elsevier, vol. 89(C), pages 21-39.
    • Handle: RePEc:eee:jomega:v:89:y:2019:i:c:p:21-39
    DOI: 10.1016/j.omega.2018.09.012
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