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Productivity: Should We Include Bads?

Author

Listed:
  • Färe, Rolf

    (Dept. of Agriculture and Resource Economics)

  • Grosskopf, Shawna

    (Dept. of Economics and Dept. of Agriculture and Resource Economics)

  • Lundgren, Tommy

    (CERE, Centre for Environmental and Resource Economics)

  • Marklund, Per-Olov

    (CERE, Centre for Environmental and Resource Economics and CERUM, Centre for Regional Science)

  • Zhou, Wenchao

    (CERUM, Centre for Regional Science)

Abstract

This paper studies the interaction between economic and environmental performance. Applying the directional output distance function approach, the purpose is to compare estimates of Luenberger total factor productivity indicators, including and excluding bad outputs. Specifically, based on unique firm level data from Swedish manufacturing covering the period 1990 to 2008, we explore to what extent excluding bad outputs leads to erroneous productivity measurement. The main conclusion is that bad outputs should not only be included in the estimations, but also reduction in bad outputs should be credited. From this point of view the directional output distance function approach and the Luenberger indicator serves as an appropriate basis of productivity measurement.

Suggested Citation

  • Färe, Rolf & Grosskopf, Shawna & Lundgren, Tommy & Marklund, Per-Olov & Zhou, Wenchao, 2012. "Productivity: Should We Include Bads?," CERE Working Papers 2012:13, CERE - the Center for Environmental and Resource Economics.
    • Handle: RePEc:hhs:slucer:2012_013
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    File URL: http://www-sekon.slu.se/~gbost/CERE_WP2012-13.pdf
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    References listed on IDEAS

    as
    1. Yoruk, BarIs K. & Zaim, Osman, 2005. "Productivity growth in OECD countries: A comparison with Malmquist indices," Journal of Comparative Economics, Elsevier, vol. 33(2), pages 401-420, June.
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    5. Briec, Walter & Kerstens, Kristiaan, 2009. "The Luenberger productivity indicator: An economic specification leading to infeasibilities," Economic Modelling, Elsevier, vol. 26(3), pages 597-600, May.
    6. Chambers, Robert G. & Fare, Rolf & Grosskopf, Shawna, 1996. "Productivity Growth in APEC Countries," Working Papers 197843, University of Maryland, Department of Agricultural and Resource Economics.
    7. Kumar, Surender, 2006. "Environmentally sensitive productivity growth: A global analysis using Malmquist-Luenberger index," Ecological Economics, Elsevier, vol. 56(2), pages 280-293, February.
    8. Yu, Ming-Miin & Hsu, Shih-Hsun & Chang, Ching-Cheng & Lee, Duu-Hwa, 2008. "Productivity growth of Taiwan's major domestic airports in the presence of aircraft noise," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 44(3), pages 543-554, May.
    9. Fare, Rolf & Grosskopf, Shawna & Pasurka, Carl Jr., 2007. "Pollution abatement activities and traditional productivity," Ecological Economics, Elsevier, vol. 62(3-4), pages 673-682, May.
    10. Byung M. Jeon & Robin C. Sickles, 2004. "The role of environmental factors in growth accounting," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(5), pages 567-591.
    11. Brännlund, Runar & Lundgren, Tommy & Marklund, Per-Olov, 2011. "Environmental Performance and Climate Policy," CERE Working Papers 2011:6, CERE - the Center for Environmental and Resource Economics.
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    Cited by:

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    2. Fang, Lei, 2020. "Opening the “black box” of environmental production technology in a nonparametric analysis," European Journal of Operational Research, Elsevier, vol. 286(2), pages 769-780.
    3. Li, Ye & Cui, Qiang, 2017. "Carbon neutral growth from 2020 strategy and airline environmental inefficiency: A Network Range Adjusted Environmental Data Envelopment Analysis," Applied Energy, Elsevier, vol. 199(C), pages 13-24.
    4. Arnaud Abad & Paola Ravelojaona, 2021. "Pollution‐adjusted productivity analysis: The use of Malmquist and Luenberger productivity measures," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(3), pages 635-648, April.
    5. Jeanneaux, Philippe & Latruffe, Laure, 2016. "Modelling pollution-generating technologies in performance benchmarking: Recent developments, limits and future prospects in the nonparametric frameworkAuthor-Name: Dakpo, K. Hervé," European Journal of Operational Research, Elsevier, vol. 250(2), pages 347-359.
    6. Arnaud Abad & Paola Ravelojaona, 2022. "A generalization of environmental productivity analysis," Post-Print hal-03592375, HAL.
    7. K Hervé Dakpo & Philippe Jeanneaux & Laure Latruffe, 2014. "Inclusion of undesirable outputs in production technology modeling:The case of greenhouse gas emissions in French meat sheep farming," Working Papers SMART 14-08, INRAE UMR SMART.
    8. Cui, Qiang & Li, Ye & Wei, Yi-Ming, 2017. "Exploring the impacts of EU ETS on the pollution abatement costs of European airlines: An application of Network Environmental Production Function," Transport Policy, Elsevier, vol. 60(C), pages 131-142.
    9. Rolf F�re & Shawna Grosskopf & Tommy Lundgren & Per-Olov Marklund & Wenchao Zhou, 2014. "Pollution-generating technologies and environmental efficiency," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 12(3), pages 233-251, August.
    10. A. Abad & P. Ravelojaona, 2022. "A generalization of environmental productivity analysis," Journal of Productivity Analysis, Springer, vol. 57(1), pages 61-78, February.
    11. Cui, Qiang & Wei, Yi-Ming & Li, Ye, 2016. "Exploring the impacts of the EU ETS emission limits on airline performance via the Dynamic Environmental DEA approach," Applied Energy, Elsevier, vol. 183(C), pages 984-994.
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    13. Zhang, Shanshan & Lundgren, Tommy & Zhou, Wenchao, 2016. "Energy efficiency in Swedish industry," Energy Economics, Elsevier, vol. 55(C), pages 42-51.

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    More about this item

    Keywords

    Swedish manufacturing; Luenberger indicator; emissions; productivity;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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