Use of Circular Malmquist Index (CMI) and Variable Returns to Scale (VRS-MI) in Productivity Measurement- a Comparative Study

Abstract

This paper aims at comparing results between the circular Malmquist index (CMI) and the variable returns to scale Malmquist index (VRS-MI) from an even panel data. Based on the ground theory, the study purposefully uses comparative discussion on above mentioned methods. The contribution of the paper is on applied feature of using different methods at the same data set. The results of the study reveal that efficiency scores of VRS-MI is of higher value than that of CMI except major unit efficient Decision Making Units (DMUs). In case of some firms, the deviations are even in extreme points- highest gap is observed by 49.72%. From the perspective of the application, this paper focuses on deviate scores and therefore updates the relevant literature. The study covers data from 2009 to 2013 and uses one output- annual sales and three inputs; namely. (i) fixed asset; (ii) raw material; and (iii) salary expenses as variables