Testing general and special Färe-Primont indices: A proposal for public and private sector synthetic indices of European regional expenditures and tourism

Abstract This contribution develops a general and a special case of the Fare-Primont total factor productivity index that has the critical property of transitivity for application in the tourism sector. In particular, its empirical application focuses on the respective contributions of public and private expenditures to the economic activity of tourism services at a regional level in Europe. Since the focus of measurement is oriented towards tourism activity, this synthetic index can be interpreted as a tourism effectiveness index. Depending on how the variables are included in the underlying technology specification, the same tourism index can be oriented towards the assessment of either the private or the public sector’s effectiveness. Consequently, the existing interdependencies between both sectors can be estimated. The empirical application contains a sample of European regions in the three years 2003, 2007 and 2011.