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In my remarks I am restricting my commentary to the contribution by R. Färe, S. Grosskopf and D. Margaritis, who measure TFP change by the Bennet–Bowley (BB) indicator
where normalized prices are defined by
This indicator can be derived from a Luenberger productivity indicator by assuming quadratic directional distance functions and profit maximization. This theory is well known.
In this article the BB indicator is basically used as an empirical TFP indicator, and related to R&D expenditure data by time series methods. However, no argument is advanced why this indicator should be preferred over an empirical TFP index such as
where value shares are defined by
This is the Törnqvist productivity index, which can also be rationalized by well-known economic theory.
On the contrary, it seems to me that from the data point of view, the Törnqvist index is more appropriate than the BB indicator. For the BB indicator one needs quantities and prices, whereas for the Törnqvist index one needs quantity relatives (index numbers) and value shares. The actual computation of the BB indicator from the data is not explained in this article, which is a shortcoming.
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Open Access This is an open access article distributed under the terms of the Creative Commons Attribution Noncommercial License (https://creativecommons.org/licenses/by-nc/2.0), which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited.
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Balk, B.M. Commentary. J Prod Anal 30, 61 (2008). https://doi.org/10.1007/s11123-008-0086-6
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DOI: https://doi.org/10.1007/s11123-008-0086-6