Decomposing productivity growth in Malaysian food manufacturing industry

Abstract

In this study, a mathematical programming-based optimization technique known as data envelopment analysis, DEA
is used to compute and analyze the decomposition of Malmquist index of total factor productivity, TFP into
technological change, technical efficiency change and scale efficiency change by utilizing an output-oriented DEA
model under the assumptions of constant and variable returns to scale. The methodology is applied to selected 5 -
digit Malaysian food manufacturing sub- industries using annual time-series data for the period 2002 to 2007. The
results suggest that the TFP growth is largely due to positive technological change or frontier shift rather than
technical efficiency change.