A superlative indicator for the Luenberger-Hicks-Moorsteen productivity indicator: Theory and application
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- A superlative indicator for the Luenberger-Hicks-Moorsteen productivity indicator_(accepted_version)
Accepted author manuscript, 594 KB, PDF document
Consisting of the difference between an output indicator and an input indicator, the Luenberger-Hicks-Moorsteen (LHM) productivity indicator allows straightforward interpretation. However, its computation requires estimating distance functions that are inherently unknown. This paper shows that a computationally simple Bennet indicator is a superlative indicator for the LHM indicator when one can assume profit-maximizing behavior and the input and output directional distance functions can be represented up to the second order by a quadratic functional form. We also show that the Luenberger- and LHM-approximating Bennet indicators coincide for an appropriate choice of directional vectors. Focusing on a large sample of Italian food and beverages companies for the years 1995-2007, we empirically investigate the extent to which this theoretical equivalence translates into similar estimates. We find that the Bennet indicator is a close empirical alternative to the LHM indicator for the sample.
Original language | English |
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Journal | European Journal of Operational Research |
Volume | 285 |
Issue number | 3 |
Pages (from-to) | 1161-1173 |
Number of pages | 13 |
ISSN | 0377-2217 |
DOIs | |
Publication status | Published - 2020 |
ID: 237042504