Exact and Superlative Measurement of the Luenberger-Hicks-Moorsteen Productivity Indicator

Abstract

This paper shows that the Bennet-Bowley profit indicator is an exact and superlative approximation of the additively complete Luenberger-Hicks-Moorsteen productivity indicator when the input and output directional distance functions can be represented up to the second order by a quadratic functional form. It also establishes the conditions under which the exact and superlative measures of the Luenberger productivity indicator and Luenberger-Hicks-Moorsteen productivity indicator coincide.

Keywords: Bennet-Bowley, difference-based indicator, total factor productivity, exact and superlative approximation

JEL Classification: C43, D21, D24