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Efficiency and Environmental Regulation

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Author Info
Francesc Hernandez-Sancho
Andres Picazo-Tadeo
Ernest Reig-Martinez ()

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Abstract

This paper proposes an extension of the enhancedefficiency indices of Färe, Grosskopf, Lovell andPasurka (1989) that considers undesirable outputsasymmetrically by assuming that firms can freelydispose of some undesirable productions, but areduction of other bad outputs generates a cost interms of desirable outputs. This methodologicalapproach is used to analyse the relative efficiency ofa sample of Spanish producers of wooden goods andfurnishings whose production process generates fourdifferent wastes. We obtain efficiency indices thatserve to measure the impact on firm performance inseveral scenarios related to environmental regulationsaimed to reduce the production of wastes. Whenenvironmental regulations are assumed, it is foundthat firms would have to sacrifice important amountsof potential desirable output in order to reallocateinputs into waste reduction. Secondly, we find thatfirms associated with a Technological Institute aswell as firms located at a marshallian type industrialdistrict are likely to be less affected byregulations. Copyright Kluwer Academic Publishers 2000

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File URL: http://hdl.handle.net/10.1023/A:1008359714729
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Publisher Info
Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

Volume (Year): 15 (2000)
Issue (Month): 4 (April)
Pages: 365-378
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Handle: RePEc:kap:enreec:v:15:y:2000:i:4:p:365-378

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Related research
Keywords: bad outputs efficiency measurement environment environmental regulations industrial districts wood and furnishings industry

References listed on IDEAS
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  1. Pittman, Russell W, 1983. "Multilateral Productivity Comparisons with Undesirable Outputs," Economic Journal, Royal Economic Society, vol. 93(372), pages 883-91, December. [Downloadable!] (restricted)
  2. Fare, Rolf, et al, 1993. "Derivation of Shadow Prices for Undesirable Outputs: A Distance Function Approach," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 374-80, May. [Downloadable!] (restricted)
  3. Fare, Rolf, et al, 1989. "Multilateral Productivity Comparisons When Some Outputs Are Undesirable: A Nonparametric Approach," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 90-98, February. [Downloadable!] (restricted)
  4. Runar Brännlund & Rolf Färe & Shawna Grosskopf, 1995. "Environmental regulation and profitability: An application to Swedish pulp and paper mills," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 6(1), pages 23-36, July. [Downloadable!] (restricted)
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Cited by:
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  1. Cuesta, Rafael A. & Knox, C.A. & Zofío, José Luis, 2007. "Environmental Efficiency Measurement with Translog Distance Functions: A Parametric Approach," Working Papers in Economic Theory 2007/02, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History). [Downloadable!]
  2. Andrés J. Picazo-Tadeo & Diego Prior, 2005. "Efficiency and environmental regulation: a "complex situation"," Working Papers 200502, Department of Business Economics, Universitat Autonoma de Barcelona. [Downloadable!]
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