A non-radial Malmquist productivity index with an illustrative application to Chinese major industries

Data envelopment analysis (DEA) measures the relative efficiency of peer units when multiple outputs and inputs are present. DEA-based Malmquist productivity index measures the technical and productivity changes over time. The current study extends the Malmquist productivity index into a non-radial index where the decision maker's preference over performance improvement can be incorporated. The non-radial Malmquist productivity index eliminates possible inefficiency represented by the non-zero slacks. The method is applied to measure the productivity change of three Chinese major industries: Textiles, Chemicals and Metallurgicals during four five-year-plan periods. The paper shows how DEA-based Malmquist productivity index can be employed to evaluate the technology and productivity changes resulted from the economic development plans. The paper also shows the importance of using the non-radial Malmquist productivity index. (C) 2002 Elsevier Science B.V. All rights reserved.