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Good Modelling of Bad Outputs: Pollution and Multiple-Output Production

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Author Info
Førsund, Finn R. () (Dept. of Economics, University of Oslo)

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Abstract

The materials balance principle points to the crucial role of material inputs in generating residuals in production processes. Pollution modelling must be of a multi-output nature. The most flexible transformation function in outputs and inputs used in textbooks is too general to make sense in pollution modelling. Specifying bads as if they are inputs, although may be defendable on a macro level as a reduced form, hides explicit considerations of various modification activities. Extending the non-parametric efficiency approach to cover bads as outputs, assuming weak disposability of the bads as the only change in the modelling of the technology, has serious weaknesses. A complete taxonomy of inputs as to the impact on both residuals and marketed products as joint outputs is derived, based on factorially determined multi-output production, thus providing information for choice of policy instruments.

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File URL: http://www.oekonomi.uio.no/memo/2008/pdf_filer/Memo-30-2008.pdf
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Publisher Info
Paper provided by Oslo University, Department of Economics in its series Memorandum with number 30/2008.

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Length: 41 pages
Date of creation: 01 Dec 2008
Date of revision:
Publication status: Published in Internastional Review of Environmental and Resource Economics, 2009, pages 1-38.
Handle: RePEc:hhs:osloec:2008_030

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Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
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Web page: http://www.oekonomi.uio.no/indexe.html
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Related research
Keywords: Multiple-output production; pollution; bads; purification; DEA;

Find related papers by JEL classification:
D62 - Microeconomics - - Welfare Economics - - - Externalities
Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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