Economic and Environmental Decomposition of Luenberger-Hicks-Moorsteen Total Factor Productivity Indicator: Empirical Analysis of Chinese Textile Firms With a Focus on Reporting Infeasibilities and Questioning Convexity

We discuss an environmental Luenberger–Hicks–Moorsteen (LHM) total factor productivity (TFP) indicator and its decomposition that incorporates a negative externality into the measurement of economic performance. Special cases generalized directional distance function are involved in definition this LHM proposed decomposition. also seek to test whether changes convexity assumption provoke differences TFP measures. apply two specifications by-production nonparametric technology implement TFP. This decomposes three terms representing technical change, inefficiency scale change. The for China's textile industry is then estimated period from 2001 2010. report infeasibilities we show framework depending on assumption. results suggest there has been increase industry: amount depends or not technology. performance poorer than one. Moreover, contradictions between convex nonconvex indicators individual observations appear substantial part sample.