A Global Malmquist-Luenberger Productivity Index - an application to OECD countries 1990-2004

The aim of this paper is to introduce an alternative measure that incorporates the concept of a global Malmquist productivity index with a directional distance function. Unlike a conventional geometric mean form of the Malmquist-Luenberger productivity index, this global index is circular and free from linear programming (LP) infeasibility. It can also be decomposed into certain sources of productivity growth such as efficiency change and technical change. The suggested methodology is employed in the analysis of 28 OECD countries over the period of 1990-2004. The empirical result shows that the northern European countries are found to have a higher productivity growth rate when compared with the rest of the OECD countries. Furthermore, we found that the main source of the productivity growth is technical change.