Does Marginal Productivity of Product Mix Matter? Data Envelopment Analysis for Marginal Profit Consistency in Taiwan’s Life Insurance Industry
Journal
Operations Research Forum
Journal Volume
5
Journal Issue
7
Date Issued
2024-03
Author(s)
Wu, Yen Tung
Abstract
Typically, the productivity change is estimated by the Malmquist productivity index and its components including technical change and efficiency change (EC). However, this ex-post analysis shows the “result” and does not essentially support the resource allocation for driving productivity. This study proposes a novel data-driven framework with marginal profit consistency (MPC), a derivative from directional marginal productivity, which measures whether the product mix toward the direction of the marginal profit maximization changes or not. An empirical study of Taiwan’s life insurance companies in 2014–2020 was conducted to validate the proposed framework and methodologies. The results provide the managerial implications and show the proposed MPC complements the EC. We illustrate the strategic positioning of each insurer and investigate the merger effect. We found that a Laggard insurer depends on its scale size to drive productivity, while the small-scale insurer should emphasize MPC rather than EC. The larger the scale an insurer pursues, the more difficult the insurer to vary on MPC.
Subjects
Data envelopment analysis | Life insurance | Marginal productivity | Marginal profit consistency | Product mix
SDGs
Publisher
Springer International Publishing
Type
journal article