A Framework Without Assumptions

The measurement of productivity change (or difference) is usually based on models relying on strong assumptions such as competitive behaviour and constant returns to scale. This chapter discusses the basics of productivity measurement and shows that one can dispense with most if not all of the usual, neo-classical assumptions. Various models are reviewed and their relationships discussed. Throughout the chapter the equivalence of multiplicative and additive models, as well as the equivalence of productivity measurement and growth accounting, is highlighted. By virtue of their structural features, the various measurement models are applicable to individual establishments and aggregates such as industries, sectors, or economies.