Tornqvist index

In economics the Tornqvist index is a discrete approximation to a continuous Divisia index. A Divisia index is a weighted sum of the growth rates of the various components, where the weights are the component's shares in total value. When a Tornqvist index is used as an approximation to the continuous Divisia index, the growth rates are defined as the difference in natural logarithms of successive observations of the components and the weights are equal to the mean of the factor shares of the components in the corresponding pair of years. The Tornqvist index represents an improvement over constant base-year weighted indexes, because as relative prices of inputs change, the Tornqvist index allows both quantities purchased of the inputs to vary and the weights used in summing the inputs to vary, reflecting the relative price changes. For the labor input measure, the Tornqvist index effectively weights the growth rate of the hours of each group of workers by their share of labor compensation.

ource

http://www.bls.gov/mfp/mfpover.htm