Malmquist Productivity Index from a regulator’s perspective

Abstract

Inter-temporal performance evaluation under a common set of weights is essential in regulated sectors where industries provide essential services for human well-being. In this paper, an innovative Malmquist Productivity Index, called Linear Overall Malmquist Productivity Index (LOMI), is proposed by combining the centralized Overall Malmquist approach introduced in Afsharian and Ahn (Or Spectrum 39:881–911, 2017) and the linearizing methods suggested in Zohrehbandian et al. (J Oper Res Soc 61:604–610, 2010) for the classical Data Envelopment Analysis. The new index is easy for practitioners to implement as it requires only solving linear and quadratic programming models and shares the same advantages of the Overall Malmquist Productivity Index. The methodological proposal is complemented and validated by assessing 21 Chilean water Companies from 2011 to 2022. On average, the suggested index shows a cumulative value of 0.9088, denoting a decline in productivity over time. Water companies are getting progressively further away from the overall benchmark technology. This finding can be explained by the occurrence of natural disasters.