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Environmental efficiency measurement with translog distance functions: A parametric approach

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Author Info
Cuesta, Rafael A.
Lovell, C.A. Knox
Zofío, José L.

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Abstract

We introduce new specifications and estimation procedures of traditional distance functions that allow researchers to undertake environmental efficiency and productivity studies within a parametric stochastic framework. Relying on a translog distance function specification that treats the outputs' vector asymmetrically by allowing equiproportional desirable outputs expansion and undesirable outputs contraction, we discuss the relevant properties that characterize the environmental hyperbolic distance function, and show that it can be easily implemented using conventional econometric techniques based on maximum likelihood estimation. We illustrate our model estimating technical efficiency scores for a panel of U.S. electricity generating units that produce electricity and SO2 emissions as byproduct.

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Publisher Info
Article provided by Elsevier in its journal Ecological Economics.

Volume (Year): 68 (2009)
Issue (Month): 8-9 (June)
Pages: 2232-2242
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Handle: RePEc:eee:ecolec:v:68:y:2009:i:8-9:p:2232-2242

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Web page: http://www.elsevier.com/locate/ecolecon

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Keywords: Parametric distance functions Stochastic frontier analysis Environmental efficiency Undesirable outputs;

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  1. Zofio, Jose L. & Prieto, Angel M., 2001. "Environmental efficiency and regulatory standards: the case of CO2 emissions from OECD industries," Resource and Energy Economics, Elsevier, vol. 23(1), pages 63-83, January. [Downloadable!] (restricted)
  2. Bruce Domazlicky & William Weber, 2004. "Does Environmental Protection Lead to Slower Productivity Growth in the Chemical Industry?," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 28(3), pages 301-324, July. [Downloadable!] (restricted)
  3. Ball, V.E. & Lovell, C.A.K. & Luu, H. & Nehring, R., 2004. "Incorporating Environmental Impacts in the Measurement of Agricultural Productivity Growth," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 29(03), December. [Downloadable!]
  4. Simar, Leopold & Wilson, Paul W., 2007. "Estimation and inference in two-stage, semi-parametric models of production processes," Journal of Econometrics, Elsevier, vol. 136(1), pages 31-64, January. [Downloadable!] (restricted)
  5. Chambers, Robert G. & Chung, Yangho & Fare, Rolf, 1996. "Benefit and Distance Functions," Journal of Economic Theory, Elsevier, vol. 70(2), pages 407-419, August. [Downloadable!] (restricted)
  6. Osman Zaim & Fatma Taskin, 2000. "A Kuznets Curve in Environmental Efficiency: An Application on OECD Countries," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 17(1), pages 21-36, September. [Downloadable!] (restricted)
  7. Lau, Lawrence J, 1972. "Profit Functions of Technologies with Multiple Inputs and Outputs," The Review of Economics and Statistics, MIT Press, vol. 54(3), pages 281-89, August. [Downloadable!] (restricted)
  8. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July. [Downloadable!] (restricted)
  9. Battese, George E. & Coelli, Tim J., 1988. "Prediction of firm-level technical efficiencies with a generalized frontier production function and panel data," Journal of Econometrics, Elsevier, vol. 38(3), pages 387-399, July. [Downloadable!] (restricted)
  10. Francesc Hernandez-Sancho & Andres Picazo-Tadeo & Ernest Reig-Martinez, 2000. "Efficiency and Environmental Regulation," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 15(4), pages 365-378, April. [Downloadable!] (restricted)
  11. Catherine J. Morrison Paul & Warren E. Johnston & Gerald A. G. Frengley, 2000. "Efficiency in New Zealand Sheep and Beef Farming: The Impacts of Regulatory Reform," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 325-337, May. [Downloadable!] (restricted)
  12. Fare, Rolf & Grosskopf, Shawna & Noh, Dong-Woon & Weber, William, 2005. "Characteristics of a polluting technology: theory and practice," Journal of Econometrics, Elsevier, vol. 126(2), pages 469-492, June. [Downloadable!] (restricted)
  13. Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November. [Downloadable!] (restricted)
  14. Zofio, Jose L & Lovell, C A Knox, 2001. "Graph Efficiency and Productivity Measures: An Application to US Agriculture," Applied Economics, Taylor and Francis Journals, vol. 33(11), pages 1433-42, September. [Downloadable!] (restricted)
  15. Picazo-Tadeo, Andres J. & Reig-Martinez, Ernest & Hernandez-Sancho, Francesc, 2005. "Directional distance functions and environmental regulation," Resource and Energy Economics, Elsevier, vol. 27(2), pages 131-142, June. [Downloadable!] (restricted)
  16. Pitt, Mark M. & Lee, Lung-Fei, 1981. "The measurement and sources of technical inefficiency in the Indonesian weaving industry," Journal of Development Economics, Elsevier, vol. 9(1), pages 43-64, August. [Downloadable!] (restricted)
  17. Rafael Cuesta & José Zofío, 2005. "Hyperbolic Efficiency and Parametric Distance Functions: With Application to Spanish Savings Banks," Journal of Productivity Analysis, Springer, vol. 24(1), pages 31-48, 09. [Downloadable!] (restricted)
  18. Murty, M.N. & Kumar, Surender, 2002. "Measuring the cost of environmentally sustainable industrial development in India: a distance function approach," Environment and Development Economics, Cambridge University Press, vol. 7(03), pages 467-486, July. [Downloadable!]
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