A Parametric Distance Function Approach for Malmquist Productivity Index Estimation

Malmquistindexes of productivity are generally estimated using index numbertechniques or non-parametric frontier approaches. The aim ofthis paper is to show that Malmquist indexes can be estimatedin a similar way using parametric-deterministic or parametric-stochasticfrontier approaches. To allow a multi-output multi-input technologyand for technical change in production, we adopt an output distancefunction which is specified in a translog form. We then showthat using the estimated parameters, several radial distancefunctions can be calculated and combined in order to estimateand decompose the productivity index. Finally, this approachis applied to a panel of Spanish insurance companies. The mainresults confirm those generally obtained for financial services:very low rates of growth and technical change in spite of a rapidderegulation process and expansion of activity.

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