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Linked-Cone Profit Ratio Estimates of U.S. Total Factor Productivity Growth, Using DEA/AR Methods

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Computational Approaches to Economic Problems

Part of the book series: Advances in Computational Economics ((AICE,volume 6))

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Abstract

Solow’s total factor productivity (TFP) equation is revisit ed in a Data Envelopment Analysis (DEA) context. Linked-cone (LC) profit ratios were used to measure the capital share and, in turn, TFP growth for the United States. Market imperfections are allowed for, and the role of slacks is evaluated. For the years 1980, 1985, and 1990, DEA methods were applied to Organization for Economic Cooperation and Development (OECD) data for ten leading industrialized nations, namely, Canada, United States (U.S.), Japan, Australia, Belgium, France, Germany, Italy, Sweden and United Kingdom. For the U.S., the LC estimates of TFP growth were noticeably greater than the TFP estimates using the standard growth accounting approach; and similarly, the LC estimates of TFP growth were greater than the TFP estimates using Malmquist indexes. Unfortunately, ignoring slacks in Malmquist indexes may well bias the efficiency measures and, in turn, the TFP growth estimates.

One of the most important steps that a country can make to become competitive is to achieve economic efficiency

Nobel Laureate L. Klein [12]

DEA is an advanced operations research (OR)/management science (MS) method called Data Envelopment Analysis; and AR is an assurance region method used to bound the modeled prices (multipliers) in the DEA model. Linked-cones (LCs) provide a linkage of the input and output multiplier bounds.

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Author information

Authors and Affiliations

  1. University of Houston, USA

    Russell G. Thompson (Professor of Decision and Information Sciences(DISC)

  2. University of Texas School of Public Health, Houston, USA

    E. A. Waltz (Graduate Research Assistant)

  3. Sultan Qaboos University, Oman, USA

    P. S. Dharmapala (Assistant Professor of the College of Commerce)

  4. Rice University, Computations were made by the OPCON Corporation, 5 Noontide Circle, The Woodlands, Texas, 77380, USA

    R. M. Thrall (Professor of Administration and Noah Harding Professor of Mathematical Sciences, Emeritus)

Authors
  1. Russell G. Thompson
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  2. E. A. Waltz
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  3. P. S. Dharmapala
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  4. R. M. Thrall
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Editor information

Editors and Affiliations

  1. University of Amsterdam, Amsterdam, The Netherlands

    Hans Amman

  2. Center for Applied Research in Economics, The University of Texas, Austin, TX, USA

    Hans Amman

  3. Imperial College of Science, Technology and Medicine, USA

    Berc Rustem

  4. University of Texas, USA

    Andrew Whinston

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© 1997 Springer Science+Business Media Dordrecht

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Thompson, R.G., Waltz, E.A., Dharmapala, P.S., Thrall, R.M. (1997). Linked-Cone Profit Ratio Estimates of U.S. Total Factor Productivity Growth, Using DEA/AR Methods. In: Amman, H., Rustem, B., Whinston, A. (eds) Computational Approaches to Economic Problems. Advances in Computational Economics, vol 6. Springer, Boston, MA. https://doi.org/10.1007/978-1-4757-2644-2_6

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  • DOI: https://doi.org/10.1007/978-1-4757-2644-2_6

  • Publisher Name: Springer, Boston, MA

  • Print ISBN: 978-1-4419-4770-3

  • Online ISBN: 978-1-4757-2644-2

  • eBook Packages: Springer Book Archive

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