Biased Technical Change and Parallel Neutrality

The Luenberger productivity indicator has many attractive features to evaluate productivity, technical and efficiency changes. Paralleling Färe et al. (1997), this paper shows that the technical change indicator can be expressed as the sum of a magnitude indicator and a bias indicator that is the sum of two bias indicators input and output oriented respectively. Using a recent concept of ``parallel neutrality'' introduced by Briec et al. (2006), some conditions under which each bias indicator makes no contribution to productivity change are established. Among the key contributions of this paper is a new linear programming model involving a graph translation homotheticity property.