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Good Modelling of Bad Outputs: Pollution and Multiple-Output Production

  • Førsund, Finn R.


    (Dept. of Economics, University of Oslo)

The materials balance principle points to the crucial role of material inputs in generating residuals in production processes. Pollution modelling must be of a multi-output nature. The most flexible transformation function in outputs and inputs used in textbooks is too general to make sense in pollution modelling. Specifying bads as if they are inputs, although may be defendable on a macro level as a reduced form, hides explicit considerations of various modification activities. Extending the non-parametric efficiency approach to cover bads as outputs, assuming weak disposability of the bads as the only change in the modelling of the technology, has serious weaknesses. A complete taxonomy of inputs as to the impact on both residuals and marketed products as joint outputs is derived, based on factorially determined multi-output production, thus providing information for choice of policy instruments.

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Paper provided by Oslo University, Department of Economics in its series Memorandum with number 30/2008.

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Length: 41 pages
Date of creation: 01 Dec 2008
Date of revision:
Publication status: Published as Førsund, Finn R., 'Good Modelling of Bad Outputs: Pollution and Multiple-Output Production' in International Review of Environmental and Resource Economics, 2009, pages 1-38.
Handle: RePEc:hhs:osloec:2008_030
Contact details of provider: Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
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