A Framework to Analyze Productivity Changes: Theoretical Aspects and Application to the Portuguese Travel Agencies Sector

Abstract

This article proposes a new framework for analyzing decision-making unit (DMU) productivity changes during two time periods. This method is based on the Luenberger productivity indicator, which uses the directional distance function. The method has two advantages, which are explained in the article. First, it evaluates simultaneously the scale of the economies and the improvements in production that have been achieved by each observed entity during the time span. Thus, it can be considered as a method that indicates the performance evolution of DMUs. Moreover, it indicates technical efficiency and technological changes during the period. This framework is applied to a Portuguese travel agencies sample that has faced a number of threats during the period 2000–2004. Conclusions are that productivity increased for the majority of the travel agencies analyzed and that these good performances are almost always explained by technical progress. Some managerial implications beneficial for agencies' productivity are drawn from this study.