Total Factor Productivity Growth in the State Road Transport Undertakings in India: An Assessment through MPI Approach

Abstract

This Paper examines the total factor productivity (TFP) growth and its components of 34 State Road Transport Undertakings (STUs) of India for the period 1989-1990 to 2000-2001 using DEA-based Malmquist Productivity Index (MPI) approach. The study finds that on average, the TFP change is -1.9% per annum over the sample time period. In order to identify the sources of TFP change, technical efficiency change (catch-up effect) and technical change (frontier shift) for each STU (over the 12-year period) are also measured. The results show that there is no significant change in technical efficiency but remarkable change in technology. Thus, the decomposed index of TFP growth shows that much of the observed regress in total productivity is explained by the negative change in technology of the STUs, over the sample period. In order to determine the effect of several background and uncontrollable variables, which cannot be included in the productivity assessment of the STUs, multiple regression analysis using fixed effect model of the panel data is conducted. The results reveal that change in Employee-Bus ratio, change in Depreciation Cost, change in Total Earnings and change in Total Cost, turn out to be the most significant variables in having impact on the change in productivity.