How to Build Sustainable Productivity Indexes

Christopher O’Donnell ()
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Christopher O’Donnell: School of Economics and Centre for Efficiency and Productivity Analysis (CEPA) at The University of Queensland, Australia

No WP102022, CEPA Working Papers Series from University of Queensland, School of Economics

Abstract: Sustainable production requires that firms produce good outputs in ways that minimise the production of bad outputs (e.g., produce electricity in ways that minimise greenhouse gas emissions). Many decision-makers would like statisticians to measure changes in productivity in a way that will reflect well on firms that adopt sustainable production practices. In this paper I describe an approach to building so-called sustainable productivity indexes. This necessarily involves assigning weights to different inputs and outputs. I assign these weights in such a way that the indexes satisfy a set of basic axioms from index theory. I illustrate the properties of different indexes using a toy data set. I discuss ways in which statisticians can assess the sensitivity of index numbers to the choice of weights. Finally, I compute sustainable productivity index numbers for sixteen sectors of the Australian economy.

Date: 2022-12
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Persistent link: https://EconPapers.repec.org/RePEc:qld:uqcepa:182

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