Multiple Directions for Measuring Biased Technical Change

Abstract

The technological change component of the Malmquist productivity index is defined as the radial distance between isoquants along a single direction. Therefore, it relies on limited information to measure technological change, which is a naturally global phenomenon. This becomes problematic, particularly when technological change is not Hicks-neutral but biased towards certain inputs or outputs. To mitigate this problem, I propose a more global measure of technological change that uses two directions. When combined with existing measures of other contributing factors, this measure constitutes an alternative productivity index, which is the geometric mean of the Malmquist and Hicks–Moorsteen productivity indices based on the cone technologies.