A New Approach to Measuring a Multidimensional Productivity Index: An Application for 60 Selected Countries

Abstract

This study aims to develop a productivity index which takes into account the multidimensional characteristics of productivities. Our multidimensional productivity index (MPI) not only measures individual productivities of economic resources but also evaluate productivity enhancing general capacities of economy. Individual productivity indices such as labor productivity are limited because they do not consider the factors, such as the globalization of economies and the market and institutional variables, that could have profound impacts on productivity. The multidimensional Productivity Index (MPI) is measured for 60 countries including 23 OECD countries and 10 Asian countries. Our methodology employs the concept of technical efficiency that allows us to measure the extent to which institutional and market factors contribute to the economic performance. Our findings indicate that standard productivity measures such as labor productivity may overestimate the overall productivity differences across the economies.

Key Words:

• Multidimensional productivity
• institutions
• market environment
• technical efficiency

Jel Classification:

• d20
• d24

Notes

1 The correlation between MPI and MPIw was 0.905. The correlation between MPIw and labor productivity was 0.908 while the correlation between MPI and labor productivity was 0.854.

Additional information

Funding

We would like to thank Korea Productivity Center (KPC) for its generous financial support.