TITLE:
Lerner Index, Productive Efficiency and Homotheticity
AUTHORS:
Andrea Mantovi
KEYWORDS:
Lerner Index, Technical Efficiency, Allocative Efficiency, Homotheticity
JOURNAL NAME:
Theoretical Economics Letters,
Vol.5 No.3,
May
14,
2015
ABSTRACT: Chambers et
al. (2014) set forth a decomposition of the Lerner index, which results in
a function on the full space of input and output
prices and quantities, such that the effect of the Farrell output measure of
technical efficiency is explicit. In close correspondence, a decomposition of
the Lerner index is established in which allocative efficiency (in both
standard and reversed form, as defined by Bogetoft et al., 2006) complements the effect of input technical efficiency,
with the reversed decomposition bound to the hypothesis of homotheticity. The
resulting functions on are conjectured to
define pregnant perspectives on the benchmark relevance of homothetic models,
and their generalizations to multiple output.