Measurement of Productivity Changes: Two Malmquist Index Approaches

The adjacent Malmquist productivity index is compared to the more recently suggested base period Malmquist productivity index. The two index approaches are evaluated with respect to base period dependency, the circular test, and with respect to a set of additional classical index tests. In addition it is shown that the base period index is independent of base period if and only if the marginal rate of substitution of inputs is independent of time. Finally, the adjacent and the base period indexes are put through a Monte Carlo (bootstrap) test to see if they yield similar results when applied to a panel of Swedish pharmacy data.