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Measuring the Cost of Environment-Friendly Textile Processing in Pakistan: A Distance Function Approach

Author

Listed:
  • Khalil, Samina

    (Senior Research Economist, Applied Economics Research Centre, University of Karachi, Karachi, Pakistan)

Abstract

The effective regulation of industrial water pollution can only be ensured when the regulatory charge/tax is equivalent to the cost of pollution abatement. Pakistan’s principle manufacturing sector is textile industry which is termed as the back bone of its economy and earns major share of foreign exchange for the country. The textile processing is the largest water polluting sub-sector of textile industry in Pakistan. The input and output data from 45 textile processing firms are used for the present analysis. Distance function values are applied using ordinary least squares method to estimate parameters for a translog form of the output distance function for textile processing firms in Pakistan. Shadow prices of BOD and COD (undesirable outputs) are obtained from the translog parameter estimates. These prices are negative for all 45 firms in the sample showing consistent results with those found in other studies. These shadow prices are useful estimates which can be used to set pollutant specific emissions charges/taxes corresponding to the existing emission standards so that the polluting firm will have incentives to comply with the standards.

Suggested Citation

  • Khalil, Samina, 2012. "Measuring the Cost of Environment-Friendly Textile Processing in Pakistan: A Distance Function Approach," Bangladesh Development Studies, Bangladesh Institute of Development Studies (BIDS), vol. 35(4), pages 29-45, December.
    • Handle: RePEc:ris:badest:0544
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Undesirable Output; Shadow Prices; Data Envelopment Analysis; Marginal Abatement Cost; BOD and COD;
    All these keywords.

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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