Methods and Applications of Measuring Green Total Factor Productivity Index

Abstract

The objective of this study is to synthesise and analyse the development of methods for measuring Green Total Factor Productivity (GTFP) by extending traditional Total Factor Productivity (TFP) estimation to include undesirable outputs. The study reviews the evolution of measurement approaches from the Malmquist index to the Malmquist-Luenberger (ML), Global Malmquist-Luenberger (GML), and more recent Slacks-based Measure Global MalmquistLuenberger (SBM-GML) models. The synthesis results indicate that when environmental factors are incorporated into the analysis, the measured level of GTFP is generally lower than traditional TFP, reflecting the trade-off between economic growth and environmental quality. Accordingly, the study also offers several suggestions for choosing an appropriate GTFP estimation method that fits the research objectives and the characteristics of the dataset.