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Measuring technical efficiency and shadow price of water pollutants for the leather industry in India: a directional distance function approach

Author

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  • Aparajita Singh

    (Indian Institute of Technology Bombay)

  • Haripriya Gundimeda

    (Indian Institute of Technology Bombay)

Abstract

This paper measures the cost of reducing pollution from the Kanpur leather industry which is a prime source of pollution in India’s largest river basin of Ganges. The study uses directional distance function approach to examine the efficiency of leather firms in abating two undesirable pollutants (total suspended solids and chromium) while expanding the desirable leather output, and provides robust estimates of the marginal abatement cost for different production and pollution abatement strategies. The study is based on the primary data collected for 61 firms in Kanpur leather cluster for the year 2016. The results show that leather firms are technically inefficient and incur high abatement cost under the existing command and control regulations. The least inefficient strategy is a balanced policy that allows firms to reduce pollution without compromising their goal of output expansion. The study finds that old, small and more pollution intensive firms can abate pollution at least cost under a market-based regime. The shadow price of pollutants estimated in this paper are useful tools in determining equilibrium discharge permit price for design of market-based instruments.

Suggested Citation

  • Aparajita Singh & Haripriya Gundimeda, 2021. "Measuring technical efficiency and shadow price of water pollutants for the leather industry in India: a directional distance function approach," Journal of Regulatory Economics, Springer, vol. 59(1), pages 71-93, February.
    • Handle: RePEc:kap:regeco:v:59:y:2021:i:1:d:10.1007_s11149-020-09422-z
    DOI: 10.1007/s11149-020-09422-z
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    Cited by:

    1. Amitrajeet A. Batabyal & Hamid Beladi, 2023. "Centralized versus Decentralized Cleanup of River Water Pollution: An Application to the Ganges," Games, MDPI, vol. 14(5), pages 1-12, October.
    2. Amitrajeet A. BATABYAL & Seung Jick YOO, 2022. "A Theoretical Analysis Of Costs, Waste Treatment, Pollution In The Ganges, And Leather Production By Tanneries In Kanpur, India," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(2), pages 47-53, June.
    3. Huiming Xie & Xiaopeng Wang & Manhong Shen & Chu Wei, 2022. "Abatement costs of combatting industrial water pollution: convergence across Chinese provinces," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 24(9), pages 10752-10767, September.
    4. Batabyal, Amitrajeet, 2023. "How spillovers from pollution cleanup in the Ganges affect welfare in Kanpur and Varanasi," MPRA Paper 118366, University Library of Munich, Germany, revised 23 Aug 2023.
    5. Amitrajeet A. Batabyal, 2023. "Tanneries in Kanpur and pollution in the Ganges: A theoretical analysis," Regional Science Policy & Practice, Wiley Blackwell, vol. 15(5), pages 1114-1123, June.
    6. Batabyal, Amitrajeet & Kourtit, Karima & Nijkamp, Peter, 2022. "Polluting tanneries and small farmers in Kanpur, India: a theoretical analysis," MPRA Paper 115216, University Library of Munich, Germany, revised 31 Aug 2022.

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    More about this item

    Keywords

    Leather industry; Directional distance function; Shadow price; Technical efficiency; Water pollution; India;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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