Profit-oriented productivity change

Jia-Ching Juo, Tsu-Tan Fu, Ming-Miin Yu and Yu-Hui Lin

Omega, 2015, vol. 57, issue PB, 176-187

Abstract: This study develops an applicable profit-oriented productivity indicator when producers pursue profit maximization and can recognize input and output prices. We define the indicator, inspired by the Luenberger indicator and the Nerlovian efficiency measurement, in terms of both quantity distance functions and profit. Hence, the study׳s first stage decomposes the profit-oriented productivity change into two terms: profit efficiency change and profit technology change. Second, we decompose profit efficiency change into the changes in technical efficiency and allocative efficiency. Finally, profit technology change is separated into two components for capturing the shifts of technology and relative output/input prices. These decompositions provide a more complete picture of the sources of productivity change. We illustrate them with a sample of Taiwanese banks and compute the results using the models of directional distance functions.

Keywords: Data envelopment analysis (DEA); Directional distance function; Nerlovian; Profit; Productivity change; Lunberger indicator (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (20)

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DOI: 10.1016/j.omega.2015.04.013

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