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Environmental performance and equilibrium

  • BRECHET, Thierry
  • MICHEL, Philippe

Firms' or industries' ranking in terms of environmental performance may be influenced by equilibrium and not only by ex ante technological characteristics. We adopt a natural definition of relative eco-efficiency between two industries operating withinthe same environmental constraint: the more eco-efficient one is the one that has the higher output level. We compare the relative eco-efficiency of two technologies characterizing two industries, and then of two firms within the same industry. Weshow that all these comparisons depend, through the equilibrium, on the environmental constraint imposed at the industry level. We also show that firm's profitability at the equilibrium depends on its eco-efficiency, but also on its labour elasticity and permits allocation: the more eco-efficient firm is not necessarily the more profitable one.

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2004072.

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Date of creation: 00 Oct 2004
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Handle: RePEc:cor:louvco:2004072
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  1. Montgomery, W. David, 1972. "Markets in licenses and efficient pollution control programs," Journal of Economic Theory, Elsevier, vol. 5(3), pages 395-418, December.
  2. Forsund, Finn R & Jansen, Eilev S, 1977. "On Estimating Average and Best Practice Homothetic Production Functions via Cost Functions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(2), pages 463-76, June.
  3. Stokey, Nancy L, 1998. "Are There Limits to Growth?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(1), pages 1-31, February.
  4. Werner Antweiler, 2003. "How Effective Is Green Regulatory Threat?," American Economic Review, American Economic Association, vol. 93(2), pages 436-441, May.
  5. Pittman, Russell W, 1983. "Multilateral Productivity Comparisons with Undesirable Outputs," Economic Journal, Royal Economic Society, vol. 93(372), pages 883-91, December.
  6. Pierre-André Jouvet & Philippe Michel & Gilles Rotillon, 2004. "A theoretical measure of environmental efficiency," Cahiers de la Maison des Sciences Economiques v04011, Université Panthéon-Sorbonne (Paris 1).
  7. W. Erwin Diewert & Alice O. Nakamura, 1999. "Benchmarking and the measurement of the best practice efficiency: an electricity generation application," Canadian Journal of Economics, Canadian Economics Association, vol. 32(2), pages 570-588, April.
  8. Zieschang, Kimberly D., 1984. "An extended farrell technical efficiency measure," Journal of Economic Theory, Elsevier, vol. 33(2), pages 387-396, August.
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