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Does Marginal Productivity of Product Mix Matter? Data Envelopment Analysis for Marginal Profit Consistency in Taiwan’s Life Insurance Industry

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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.

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Data Availability

The data that support the findings of this study are available from public financial reports of insurance sectors.

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Acknowledgements

This study was funded by the Ministry of Science and Technology of Taiwan (MOST111-2628-E-002-019-MY3).

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Authors and Affiliations

  1. Department of Information Management, National Taiwan University, Taipei, Taiwan

    Yen-Tung Wu & Chia-Yen Lee

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  1. Yen-Tung Wu
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  2. Chia-Yen Lee
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Contributions

Conceptualization, Chia-Yen Lee; data curation, Yen-Tung Wu; formal analysis, Yen-Tung Wu; investigation, Yen-Tung Wu; methodology, Chia-Yen Lee; project administration, Chia-Yen Lee; resources, Chia-Yen Lee; software, Yen-Tung Wu; supervision, Chia-Yen Lee; validation, Yen-Tung Wu; writing—original draft, Yen-Tung Wu; writing—review and editing, Chia-Yen Lee.

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Correspondence to Chia-Yen Lee.

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The authors declare no competing interests.

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Wu, YT., Lee, CY. Does Marginal Productivity of Product Mix Matter? Data Envelopment Analysis for Marginal Profit Consistency in Taiwan’s Life Insurance Industry. Oper. Res. Forum 5, 7 (2024). https://doi.org/10.1007/s43069-023-00287-4

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