THE RISE AND FALL OF SLACKS - COMMENTS ON QUASI-MALMQUIST PRODUCTIVITY INDEXES

The Malmquist productivity index has been based on ratios of radial Fa rrell efficiency scores. Calculating these relative to piecewise linea r production frontiers slacks may appear, implying that the full magni tude of inefficiency is not revealed. Should the index rather be based on efficiency measures including slacks? Two arguments against are of fered. Firstly, productivity calculation is different from efficiency calculation in the sense that the former compares actual data points w hile the latter expresses hypothetical productivity improvement. Secon dly, slacks appear due to the ''default rule'' of using ''inner bounds '' of vertical and/or horizontal segments at the ''edges'' of the tech nology set.