Technical Components of Total Factor Productivity Growth in Malaysian Manufacturing Industry

Nik Hashim Nik Mustapha, Nik Mohd Hazrul Hashim, Ridzuan Yacob

Faculty of Management and Economics, University of Malaysia Terengganu, Kuala Terengganu, Malaysia.
Graduate School of Business, National University of Malaysia, Bandar Baru Bangi, Malaysia.

DOI: 10.4236/am.2013.49169                

Abstract

This article attempts to disaggregate and explore the components of TFP growth that contribute to changes in output, scale of production, and allocative efficiency and technical efficiency of the Malaysian manufacturing sector. The total factor productivity (TFP) concept defined as total output per unit of all inputs used in the production of an industry has gained a prominent place in academia. The investigation on TFP growth is obviously useful for identifying sources of output growth in the development of an industry. The TFP growth is often interchangeably understood as the technical progress or changes in technology as the sole contributor to economic development. Nonetheless there are other factors contributing to its substance. Knowledge on these technical changes would help decision makers to realize the strengths and weaknesses that contribute to the growth and development of an industry. Alternatively this research would be more beneficial in the case of cross-industry or cross-country comparative studies in order to plan for developmental goal. In such a case a model industry or country can be chosen that exhibits special growth features.

Keywords

Total Factor Productivity Growth; Technical Efficiency; Scale Effect; Stochastic Production Frontier

Conflicts of Interest

The authors declare no conflicts of interest.

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