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Environmental Efficiency Measurement with Translog Distance Functions: A Parametric Approach

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Author Info
Cuesta, Rafael A. () (Departamento de Economía, Universidad de Oviedo, E-33071, Oviedo, Spain.)
Knox, C.A. () (Department of Economics, Terry College of Business, University of Georgia, Athens, GA 30602, USA)
Zofío, José Luis () (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.)

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Abstract

We use a flexible parametric hyperbolic distance function to estimate environmental efficiency when some outputs are undesirable. Cuesta and Zofio (J. Prod. Analysis (2005), 31-48) introduced this distance function specification in conventional input-output space to estimate technical efficiency within a stochastic frontier context. We extend their approach to accommodate undesirable outputs and to estimate environmental efficiency within a stochastic frontier context. This provides a parametric counterpart to Färe et al.’s popular nonparametric environmental efficiency measures (Rev. Econ. Stat. 75 (1989), 90-98). The distance function model is applied to a panel of U.S. electricity generating units that produce marketed electricity and non-marketed SO2 emissions.

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Paper provided by Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History) in its series Working Papers in Economic Theory with number 2007/02.

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Length: 21 pages
Date of creation: Mar 2007
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Handle: RePEc:uam:wpaper:200702

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Keywords: Undesirable outputs parametric distance functions stochastic frontier analysis environmental efficiency

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Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models
L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities

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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. 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)
  4. 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)
  5. 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)
  6. 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)
  7. 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)
  8. 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)
  9. 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)
  10. 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)
  11. 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)
  12. 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)
  13. 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)
  14. 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)
  15. 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)
  16. 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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