Functional Estimation of Technical Progress: an Operations Research Approach

Technical change and its measurement is a fascinating subject. The various procedures to measure technical change fall into two categories (i). The parametric approach and (ii). The non-parametric approach. In theformer case, a parametric production function is postulated a priori, using it as basic tool, technical change is estimated. The present book aims at presenting a method to measure technicalprogress relaxing the assumptions of full profit efficiency and constant returns to scale. The method is essentially non-parametric, in which wesolve a number of linear programming problems, first to measure frontier technical change and hence, to estimate average technical change. The rate of shift of frontier production function is attributed to technical progress or innovation and rate of change in profit efficiency is assumed to be due to the CATCHING UP effort of the producer to reach the frontier.