Environmentally adjusted efficiency of shrimp farming in Bangladesh

Shrimp farming has experienced spectacular growth in the coastal areas of Bangladesh, benefiting the economy enormously. However, the economic benefits are paralleled with substantial environmental and natural resource degradation that can be attributed to shrimp farming. This chapter evaluates the efficiency of shrimp farming using a directional output distance function approach, taking into account both economic and environmental performance. The study covers the major shrimp-farming regions in Bangladesh and evaluates their performance considering four models. The results indicate that efficiency scores differ significantly between models including undesirable outputs compared to the model without undesirable outputs. Efficiency levels also appeared to vary significantly across shrimp-farming regions of Bangladesh. The study also calculates the errors in efficiency measurement when undesirable outputs are excluded from the production technology, considering alternative assumptions of weak and strong disposability of outputs.