Application of Malmquist productivity index with carry-overs in power industry

Abstract

Total Factor Productivity (TFP), as a main resource in providing economic development, has a significant role in increasing competitiveness because one can study the performance rate of economic and industrial sectors in optimal utilisation of productive resources through analysis and calculation of TFP indexes. In Data Envelopment Analysis (DEA), there are different methods for measuring changes in TFP of Decision Making Units (DMU) at different times using different technologies. One of the most important is the Malmquist Productivity Index (MPI). Currently, in many economic and industrial activities namely investment and energy, there are some indexes that transform during different periods (called Carry-Over) and thus affect the performance of a DMU in another period, based on the performance of a DMU in a specific time period. These indexes may vary from time to time, i.e. in one time interval they may be good and in another one they may be bad; this tends to be ignored in the traditional MPI. In this paper, we develop the MPI by considering transforming indexes using a Slack-Based Measure (SBM) model in Variable Returns to Scale (VRS). Finally, we analyse the electricity industry of Iran in two consecutive years. Keywords: Data envelopment analysis, Malmquist productivity index, Carry-over index, Electricity