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Modeling Emission-Generating Technologies: Reconciliation of Axiomatic and By-Production Approaches

Author

Listed:
  • Sushama Murty

    (Department of Economics, University of Exeter and Jawaharlal Nehru University)

  • R. Robert Russell

    (University of California, Riverside)

Abstract

We study the link between the by-production approach of Murty, Russell, and Levkoff [2012 J. Environ. Econ.] (MRL) and the axiomatic approach of Murty [2015 Econ. Theory] to modelling emission-generating technologies. We show that the by-production technology of MRL, obtained as an intersection of two independent sub-technologies, satisfies all the Murty axioms. Conversely, a technology satisfying all these axioms decomposes into two independent subtechnologies having the MRL features. These two sub-technologies, refl ect, respectively, the relations between goods in intended-output production designed by human engineers, on the one hand, and the emission-generating mechanism of nature governed by material-balance considerations, on the other. In either approach, the technology can be functionally represented by two radial distance functions with well-defined properties. These distance functions can also serve as measures of technological and environmental efficiency. We exploit the link between the by-production and axiomatic approaches to offer preliminary suggestions about suitable functional forms for the empirical estimation of the two distance functions.

Suggested Citation

  • Sushama Murty & R. Robert Russell, 2016. "Modeling Emission-Generating Technologies: Reconciliation of Axiomatic and By-Production Approaches," Discussion Papers 1603, University of Exeter, Department of Economics.
    • Handle: RePEc:exe:wpaper:1603
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    References listed on IDEAS

    as
    1. Murty, Sushama, 2010. "Externalities and fundamental nonconvexities: A reconciliation of approaches to general equilibrium externality modeling and implications for decentralization," Journal of Economic Theory, Elsevier, vol. 145(1), pages 331-353, January.
    2. Murty, Sushama & Russell, R. Robert, 2010. "On modeling pollution-generating technologies," Economic Research Papers 271176, University of Warwick - Department of Economics.
    3. Serra, Teresa & Chambers, Robert G. & Oude Lansink, Alfons, 2014. "Measuring technical and environmental efficiency in a state-contingent technology," European Journal of Operational Research, Elsevier, vol. 236(2), pages 706-717.
    4. Sushama Murty, 2015. "Marginal reforms to facilitate climate change mitigation: An assessment of costs and abilities to abate of different countries," Discussion Papers 1508, University of Exeter, Department of Economics.
    5. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521322249, January.
    6. Starrett, David A., 1972. "Fundamental nonconvexities in the theory of externalities," Journal of Economic Theory, Elsevier, vol. 4(2), pages 180-199, April.
    7. Forsund, Finn R., 2009. "Good Modelling of Bad Outputs: Pollution and Multiple-Output Production," International Review of Environmental and Resource Economics, now publishers, vol. 3(1), pages 1-38, August.
    8. Tim Coelli & Ludwig Lauwers & Guido Huylenbroeck, 2007. "Environmental efficiency measurement and the materials balance condition," Journal of Productivity Analysis, Springer, vol. 28(1), pages 3-12, October.
    9. Murty, Sushama & Robert Russell, R. & Levkoff, Steven B., 2012. "On modeling pollution-generating technologies," Journal of Environmental Economics and Management, Elsevier, vol. 64(1), pages 117-135.
    10. Atkinson, Scott E. & Primont, Daniel, 2002. "Stochastic estimation of firm technology, inefficiency, and productivity growth using shadow cost and distance functions," Journal of Econometrics, Elsevier, vol. 108(2), pages 203-225, June.
    11. Pethig, Rudiger, 2006. "Non-linear production, abatement, pollution and materials balance reconsidered," Journal of Environmental Economics and Management, Elsevier, vol. 51(2), pages 185-204, March.
    12. Sushama Murty, 2015. "On the properties of an emission-generating technology and its parametric representation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 60(2), pages 243-282, October.
    13. Moslener, Ulf & Requate, Till, 2007. "Optimal abatement in dynamic multi-pollutant problems when pollutants can be complements or substitutes," Journal of Economic Dynamics and Control, Elsevier, vol. 31(7), pages 2293-2316, July.
    14. Kumbhakar, Subal C. & Tsionas, Efthymios G., 2016. "The good, the bad and the technology: Endogeneity in environmental production models," Journal of Econometrics, Elsevier, vol. 190(2), pages 315-327.
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    More about this item

    Keywords

    emission-generating technologies; by-production technologies; free input and output disposability; costly disposability; distance function.;
    All these keywords.

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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