Total factor productivity (TFP) index is the ratio of the weighted aggregate output to a
weighted aggregate input quantity index. TFP growth is the geometric mean of Malmquist
TFP indices that can be decomposed in to two output-based measures: one index uses period t
technology and the other period t+1 technology (Coelli 2005). The Malmquist indices are
defined using distance functions. This approach is arguably superior in identifying the net
gain in efficiency after input adjustments by the DMU. TFP is measured in two stages. The
Malmquist index of total factor productivity change (TFPCH) over period t and t+1 is the product of technical efficiency change (EFFCH) and technological change (TECHCH) as
follows: