An ethics-based decomposition of Malmquist productivity index using data envelopment analysis

Document Type : Research Paper


Department of Mathematics, Iran University of Science and Technology, Tehran, Iran


Productivity growth and efficiency improvements are the major sources of economic development. Pure efficiency, scale efficiency, and technology are basic factors, and rules and regulations and balance are recently known factors affecting the Malmquist productivity index. The index is the most common productivity growth index that uses data envelopment analysis models over multiple time periods. In this paper, we focus on the effect of the ethics factor in the decomposition of Malmquist productivity change index at the bank branch level by first developing an ethics model using some ethical codes and then calculating the ethics factor of decision making units. The ethics model uses weight restrictions for the constant returns to scale technologies to increase discrimination power of basic data envelopment analysis models. Then, the proposed ethics model is applied to a sample of 41 commercial bank branches and the results for both traditional and extended Malmquist index are analyzed.


Main Subjects

Abbas, M.Hammad, R.Elshahat, M. and Azid, T. (2015), Efficiency, productivity and Islamic banks: an application of DEA and Malmquist index, Humanomics, Vol. 31 No. 1, pp. 118-131.
Ackoff, R. L. (1974). The social responsibility of operational research. Operational Research Quarterly 25: 361–371.
Ahn, H., Le, & M. H. (2014). An insight into the specification of the input-output set for DEA-based bank efficiency measurement. Manag Rev Q 64: 3.
Alirezaee, M. R., & Afsharian, M. (2010). Improving the discrimination of data envelopment analysis models in multiple time periods. International Transactions in Operational Research 17: 667-679.
Alirezaee, M. R., & Rajabi Tanha, M. (2015). Extending the Malmquist index to consider the balance factor of decision making units in a productivity analysis. IMA journal of Management Mathematics 27(3): 439-452.
Allen, R., Athanassopoulos, A., Dyson, R. G., & Thanassoulis, E. (1997). Weights restrictions and value judgments in data envelopment analysis: Evolution development and future directions. Annals of Operations research 73: 13-34.
Banker, R. D., Charnes, A., & Cooper, W. W. (1984). Some models for estimating technical and scale in efficiency in data envelopment analysis. Management Science 31: 1078-1092.
Basso, A., Funari, S. (2003). Measuring the performance of ethical mutual funds: a DEA approach. Journal of Operational Research Society 54(5): 521-531.
Basso, A., & Funari, S. (2007). DEA models for ethical and non ethical mutual funds. Mathematical Methods in Economics and Finance 2(1): 21-40.
Brans, J. P., & Kunsch, P. L. (2010). Ethics in operations research and sustainable development. International Transactions in Operational Research 17: 427-444.
Brooke, A. D., Kendrick, A., Meeraus, A., & Raman, A. (1998). GAMS: A Use Guide. GAMS Development Corporation, Washington, DC.
Caves, D. C., Christensen, L. R., & Dievert, W. E. (1982). The economic theory of index number and the measurement of input, output, and productivity. Econometrica 50: 1393-1414.
Charnes, A., Cooper, W. W., & Rhodes, E. (1978). Measuring the efficiency of decision making units. European Journal of Operational Research 2: 429-444.
Churchman, C. W. (1961). Prediction and Optimal Decision: Philosophical Issues of a Science of Values. Prentice-Hall, Englewood Cliffs, NJ.
Churchman, C. W. (1968). Challenge to Reason. McGraw-Hill, New York.
Churchman, C. W. (1979). The Systems Approach and Its Enemies. Basic Books, New York.
Churchman, C. W. (1994). Management science: science of managing and managing of science. Interfaces 24 (4): 99–110.
Ding, S., Guariglia A., Harris, R., (2016). The determinants of productivity in Chinese large and medium-sized industrial firms, 1998–2007. J Prod Anal 45: 131.
Fare, R., Grosskopf, S., Lindgren, B., & Roose, P. (1992). productivity change in Swedish analysis pharmacies 1980-1989: A nonparametric Malmquist approach. Journal of productivity 3: 85-102.
Fare, R., Grosskopf, S., Norris, M., & Zhang, A. (1994). Productivity growth, technical progress, and efficiency changes in industrial country. American Economic Review 84: 66-83.
Farrell, M. J. (1957). The measurement of productive efficiency. Journal of the Royal Statistical Society, Series A 120: 253-281.
FraƄczuk, M. (2019). Codes of Banking Ethics and Banking Soft Law in Poland. Journal of Vasyl Stefanyk Precarpathian National University, Vol. 6 No. 2: 49-54.
Gass, S. I. (2009). Ethical guidelines and codes in operational research. Omega 37: 1044–1050.
Kleijnen, J. P. C. (2001). Ethical issues in modeling: Some reflections. European Journal of Operational Research 130: 223-230.
Malmquist. S. (1953). Index numbers and indifferent surfaces. Trabajos de Estadistica 4: 209-242.
Mohammad, J., Quoquab, F., Omar, R., (2016). Factors Affecting Organizational Citizenship Behavior among Malaysian Bank Employees: The Moderating Role of Islamic Work Ethic, Procedia - Social and Behavioral Sciences, Volume 224, 562-570.
Ormerod, R. J., & Ulrich, W. (2013). Operational research and ethics: A literature review. European Journal of Operational Research 228: 291-307.
Paradi, J. C., & Zhu, H. (2013). A survey on bank branch efficiency and performance research with data envelopment analysis. Omega 41: 61-79.
Podinovski, V. V., & Thanassoulis, E. (2007). Improving discrimination in data envelopment analysis: Some practical suggestions. Journal of Operational Research Society 28: 117-126.
Smith, S. M. (2018). Can a Code of Ethics Reduce Sabotage and Increase Productivity Under Tournament-Based Compensation? An Experimental Study. AAA 2019 Management Accounting Section (MAS) Meeting. Available at SSRN: or
Sowlati, T., & Paradi, J. C. (2004). Establishing the "practical frontier" in data envelopment analysis. Omega 32: 261-272.
Thanassoulis, E., Portela, M., & Allen, R. (2004). Incorporating value judgments in DEA In: Cooper, W.W., Seiford, L.W., Zhu, J. (Eds.). Handbook on Data Envelopment Analysis. Kluwer Academic Publishers, pp 99-138, Dordrecht.
Triebs T.P., Kumbhakar S.C. (2018). Management in production: from unobserved to observed. Prod Anal 49: 111.
Yen, H., (2017). Perception on ethical climate and individual job performance of bank employees. Journal of Economic Development. 24. 85-98. 10.24311/jed/2017.24.4.4.
Wenstøp, F. (2010). Operations research and ethics: development trends 1966-2009. International Transactions in Operational Research 17: 413-426.
  • Receive Date: 02 June 2019
  • Revise Date: 30 September 2019
  • Accept Date: 16 October 2019
  • First Publish Date: 01 November 2019