Productivity measures ignoring environmental effects may give misleading information on total productivity growth. Further, business cycles in the form of capacity utilization may significantly influence productivity measures. We develop an overall Malmquist productivity index and decompose changing efficiency rates into a contribution from environmental factors, capital, and capacity utilization. Our new combined capacity utilization element contributes to the literature in that it also takes into account the restriction for producing negative externalities. Empirical applications illustrate that the choice of inputs influences the overall productivity measure and its decomposition into efficiency changes and technical changes, and the capacity utilization element.
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Article provided by University of Wisconsin Press in its journal Land Economics.
Find related papers by JEL classification: C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Semiparametric and Nonparametric Methods O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
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