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Measuring the Growth Rates of Multi-Factor Productivity: Malmquist Index Approach

Apr 2014
Working Paper
Jeong Yeon Lee

Lee (2014) provides the estimates of the Solow residual for 24 OECD countries. To complement these estimates in examining relative productivity of individual countries, this paper measures the growth rates of multi-factor productivity (MFP) for the same sample of 24 OECD countries using the Malmquist index approach. The Malmquist index approach is expected to address some of the limitations of the growth accounting approach by relying on the concept of the best-practice frontier. The best-practice frontier offers a common reference point against which relative productivity growth of all sample countries are measured. The use of the best-practice frontier in measurement also allows productivity growth to be broken down into technical change and efficiency change. When the same input-output variables are used, the time trends of MFP growth identified by both approaches are found to be more or less in sync, whereas there are noticeable differences in the relative standing among the sample countries between the two approaches.

Publication Keywords: 
Economic Growth; Multi-Factor Productivity; Malmquist Index; OECD
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