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The Rise and Fall of Slacks: Comments on Quasi-Malmquist Productivity Indices

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  • Finn Førsund

Abstract

The Malmquist productivity index has been based on ratios of radial Farrell efficiency scores. Calculating these relative to piecewise linear production frontiers slacks may appear, implying that the full magnitude of inefficiency is not revealed. Should the index rather be based on efficiency measures including slacks? Two arguments against are offered. Firstly, productivity calculation is different from efficiency calculation in the sense that the former compares actual data points while the latter expresses hypothetical productivity improvement. Secondly, slacks appear due to the “default rule” of using “inner bounds” of vertical and/or horizontal segments at the “edges” of the technology set. Copyright Kluwer Academic Publishers 1998

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  • Finn Førsund, 1998. "The Rise and Fall of Slacks: Comments on Quasi-Malmquist Productivity Indices," Journal of Productivity Analysis, Springer, vol. 10(1), pages 21-34, July.
    • Handle: RePEc:kap:jproda:v:10:y:1998:i:1:p:21-34
    DOI: 10.1023/A:1018342214700
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    Cited by:

    1. E. Grifell-Tatjé & C. A. K. Lovell, 1999. "Profits and Productivity," Management Science, INFORMS, vol. 45(9), pages 1177-1193, September.
    2. Sahoo, Biresh K. & Tone, Kaoru, 2009. "Decomposing capacity utilization in data envelopment analysis: An application to banks in India," European Journal of Operational Research, Elsevier, vol. 195(2), pages 575-594, June.
    3. Mei-Ying Huang & Jia-Ching Juo & Tsu-tan Fu, 2015. "Metafrontier cost Malmquist productivity index: an application to Taiwanese and Chinese commercial banks," Journal of Productivity Analysis, Springer, vol. 44(3), pages 321-335, December.

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