Calculation of Total Factor Productivity Growth Using DEA Models: A Case Study in Electric Power Industry

Total Factor Productivity (TFP) as an index for calculating productivity level in an organization, describes the conversion procedure of total expenditure into total income. Therefore TFP growth will result improvements in market competition, production and services quality and performance, progress in planned targets, expenses reduction, incomes expansion and etc. In order to evolue from an input oriented to productivity oriented economy, all administrations are bound to declare the portion of productivity growth in their respective production growth in the Fourth Development planning. Such that at the end of the Fourth planning the TFP portion in GDP growth has to reach 31.3%. Although an average growth of 3.5% in Labor, 1% in Capital and 2.5% in Total Factor have to be achieved annually during the Fourth planning. However, recognizing the sources of productivity growth for planning and deriving solutions is of great importance. In addition to TFP growth calculation, using a combination of non-parametric Data Envelopment Analysis (DEA) method and Tornquist productivity growth index, provide a decomposition of efficiency and technological changes quota in the respective TFP growth for one Decision Making Unit (DMU) in adjacent time periods. To examine the proposed method more accurately, in this study the TFP growth and effective factors through years (1347-1383) in Iran’s Electric Power industry has been analyzed.