The Cost Malmquist Index decomposition for analysis of the total factor productivity change in Lithuanian family farms

Abstract

By combining approaches of N. Maniadakis and E. Thanassoulis (2004) and R. Färe et al. (1994), this paper extends the decomposition of the cost Malmquist Lithuanian Institute of Agrarian Economics, productivity index to tackle variable returns to scale technology and, hence, scale efficiency. The cost Malmquist index was applied to estimate the dynamics of the V. Kudirkos Str. 18, LT-03105 Vilnius, Lithuania total factor productivity in the Lithuanian family farms. The carried out research E-mail: tomas@laei.lt relies on data from the Farm Accountancy Data Network. Indeed, the balanced panel covering 200 farms throughout the period of 2004–2009 was analyzed. Specifically, the cost Malmquist indices were computed by the means of the data envelopment analysis. What the results of analysis do indicate is that the cost productivity increased by some 7.7% and the technical productivity grew by 22.4% during 2004–2009. The increase in the total factor productivity was mainly driven by increase in technical efficiency. Therefore, one can conclude that the impact of innovations on the overall shifts in the production frontier was a rather meagre one.