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Accounting for externalities and disposability: A directional economic environmental distance function

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  • Adler, Nicole
  • Volta, Nicola

Abstract

The existence of positive and negative externalities ought to be considered in a productivity analysis in order to obtain unbiased measures of efficiency. In this research we present an additive style, data envelopment analysis model that considers the production of both negative and positive externalities and permits a limited increase in input utilisation where relevant. The directional economic environmental distance (DEED) function is a unified approach based on a linear program that evaluates the relative inefficiency of the units under examination with respect to a unique reference technology. We discuss the impact of disposability assumptions in depth and demonstrate how different versions of the DEED model improve on models presented in the literature to date.

Suggested Citation

  • Adler, Nicole & Volta, Nicola, 2016. "Accounting for externalities and disposability: A directional economic environmental distance function," European Journal of Operational Research, Elsevier, vol. 250(1), pages 314-327.
  • Handle: RePEc:eee:ejores:v:250:y:2016:i:1:p:314-327
    DOI: 10.1016/j.ejor.2015.10.064
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    Cited by:

    1. D’Inverno, Giovanna & Carosi, Laura & Romano, Giulia & Guerrini, Andrea, 2018. "Water pollution in wastewater treatment plants: An efficiency analysis with undesirable output," European Journal of Operational Research, Elsevier, vol. 269(1), pages 24-34.
    2. Fang, Lei, 2020. "Opening the “black box” of environmental production technology in a nonparametric analysis," European Journal of Operational Research, Elsevier, vol. 286(2), pages 769-780.
    3. Ke Wang & Yujiao Xian & Chia-Yen Lee & Yi-Ming Wei & Zhimin Huang, 2019. "On selecting directions for directional distance functions in a non-parametric framework: a review," Annals of Operations Research, Springer, vol. 278(1), pages 43-76, July.
    4. Ha, Hun Koo & Kaneko, Shinji & Yamamoto, Masashi & Yoshida, Yuichiro & Zhang, Anming, 2017. "On the discrepancy in the social efficiency measures between parametric and non-parametric production technology identification," Journal of Air Transport Management, Elsevier, vol. 58(C), pages 9-14.
    5. Wang, Ke & Zhang, Xian & Yu, Xueying & Wei, Yi-Ming & Wang, Bin, 2016. "Emissions trading and abatement cost savings: An estimation of China's thermal power industry," Renewable and Sustainable Energy Reviews, Elsevier, vol. 65(C), pages 1005-1017.
    6. Fangqing Wei & Junfei Chu & Jiayun Song & Feng Yang, 2019. "A cross-bargaining game approach for direction selection in the directional distance function," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 41(3), pages 787-807, September.
    7. Ferrier, Gary D. & Johnson, Andrew L. & Layer, Kevin & Sickles, Robin C., 2018. "Direction Selection in Stochastic Directional Distance Functions," Working Papers 18-010, Rice University, Department of Economics.
    8. Lei Chen & Fei-Mei Wu & Feng Feng & Fujun Lai & Ying-Ming Wang, 2018. "A Common Set of Weights for Ranking Decision-Making Units with Undesirable Outputs: A Double Frontiers Data Envelopment Analysis Approach," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 35(06), pages 1-25, December.
    9. Yujiao Xian & Ke Wang & Xunpeng Shi & Chi Zhang & Yi-Ming Wei & Zhimin Huang, 2018. "Carbon emissions intensity reduction target for China¡¯s power industry: An efficiency and productivity perspective," CEEP-BIT Working Papers 117, Center for Energy and Environmental Policy Research (CEEP), Beijing Institute of Technology.
    10. Wang, Ke & Wei, Yi-Ming & Huang, Zhimin, 2018. "Environmental efficiency and abatement efficiency measurements of China's thermal power industry: A data envelopment analysis based materials balance approach," European Journal of Operational Research, Elsevier, vol. 269(1), pages 35-50.
    11. Lefeng, Shi & Chunxiu, Liu & Jingrong, Dong & Cipcigan, Liana, 2020. "External benefits calculation of sharing electric vehicles in case of Chongqing China," Utilities Policy, Elsevier, vol. 64(C).
    12. Ke Wang & Yi-Ming Wei & Zhimin Huang, 2017. "Environmental efficiency and abatement efficiency measurements of China¡¯s thermal power industry: A data envelopment analysis based materials balance approach," CEEP-BIT Working Papers 108, Center for Energy and Environmental Policy Research (CEEP), Beijing Institute of Technology.
    13. Chen, Lei & Wang, Ying-Ming & Lai, Fujun, 2017. "Semi-disposability of undesirable outputs in data envelopment analysis for environmental assessments," European Journal of Operational Research, Elsevier, vol. 260(2), pages 655-664.

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