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- Shadow Prices And Distance Functions: An Analysis For Firms Of The Spanish Ceramic Pavements Industry


  • Francesc Hernández Sancho

    () (Universitat de València)

  • Andrés Picazo

    (Universidad de Alicante)

  • Ernest Reig Martínez

    (Universitat de València)


This paper deals with the calculation of shadow prices for two industrial wastes generated on their production processes by a sample of eighteen firms belonging to the Spanish ceramic pavements industry. These prices are used to construct a corrected index of productivity which allows for considering wastes going with the production of marketable goods. It is followed the ethodologicalapproach first proposed by Färe, Grosskopf, Lovell y Yaisawarng (1993), which establishes a duality between distance and revenue functions. The shadow prices obtained for watery muds and used oils allow to measure in terms of a loss of marketable output the cost of achieving a marginal reduction in the production of these wastes. It is also found a negative correlation between absolute shadow prices and the intensity of wastes production, reflecting a greater marginal cost of eliminating wastes for those firms that have already made investments on cleaner procedures. Finally, differences between a conventional labour productivity index and a corrected productivity index are related to some firms¿ characteristics: size, recorded investments in cleaner technologies ad affiliation to a Ceramics Technological Institute, and found to be statistically significant. En este trabajo se estiman los precios sombra de los residuos industriales que acompañan a laproducción de pavimentos cerámicos de un conjunto de dieciocho empresas del sector. Estosprecios son utilizados para construir una medida corregida de productividad que considera laproducción de residuos como outputs no deseables. Para la obtención de los precios sombra seutiliza un enfoque basado en la dualidad entre función distancia y función de ingresos propuestopor Färe, Grosskopf, Lovell y Yaisawarng (1993). Los resultados muestran que los preciossombra de los lodos acuosos y aceites industriales usados representan un notable coste deoportunidad para las empresas, cuantifica-ble en términos de pérdidas de producción deseable.Se observa, además, una cierta correlación nega-tiva entre la intensidad de producción deresiduos y el valor absoluto de sus precios sombra, lo que puede reflejar los mayores costesmarginales de la reducción de residuos para aquellas empresas que ya vienen aplicandoprocesos de producción más eficientes en términos medioambientales. Final-mente, secomprueba que las diferencias entre el índice convencional de productividad del trabajo y el índicecorregido están relacionadas en forma estadísticamente significativa con características de lasempresas tales como su dimensión, la realización previa de inversiones en tecnologías limpias yla afiliación al Instituto Tecnológico de la Cerámica AICE.

Suggested Citation

  • Francesc Hernández Sancho & Andrés Picazo & Ernest Reig Martínez, 1999. "- Shadow Prices And Distance Functions: An Analysis For Firms Of The Spanish Ceramic Pavements Industry," Working Papers. Serie EC 1999-19, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  • Handle: RePEc:ivi:wpasec:1999-19

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    References listed on IDEAS

    1. Coggins, Jay S. & Swinton, John R., 1996. "The Price of Pollution: A Dual Approach to Valuing SO2Allowances," Journal of Environmental Economics and Management, Elsevier, vol. 30(1), pages 58-72, January.
    2. Fare, Rolf & Knox Lovell, C. A., 1978. "Measuring the technical efficiency of production," Journal of Economic Theory, Elsevier, vol. 19(1), pages 150-162, October.
    3. Fare, Rolf, et al, 1993. "Derivation of Shadow Prices for Undesirable Outputs: A Distance Function Approach," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 374-380, May.
    4. Rolf Färe & Shawna Grosskopf, 1998. "Shadow Pricing of Good and Bad Commodities," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(3), pages 584-590.
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    Cited by:

    1. Andrés J. Picazo-Tadeo & Ernest Reig-Martínez, 2005. "Calculating shadow wages for family labour in agriculture : An analysis for Spanish citrus fruit farms," Cahiers d'Economie et Sociologie Rurales, INRA Department of Economics, vol. 75, pages 5-21.
    2. Andrés J. Picazo-Tadeo & Diego Prior, 2005. "Efficiency and Environmental Regulation: A "Complex Situation"," Working Papers 0502, Departament Empresa, Universitat Autònoma de Barcelona, revised Feb 2005.
    3. Soledad Moya & Jordi Perramon & Anselm Constans, 2005. "IFRS Adoption in Europe: The Case of Germany," Working Papers 0501, Departament Empresa, Universitat Autònoma de Barcelona, revised Feb 2005.
    4. Picazo-Tadeo, Andres J. & Reig-Martinez, Ernest & Hernandez-Sancho, Francesc, 2005. "Directional distance functions and environmental regulation," Resource and Energy Economics, Elsevier, vol. 27(2), pages 131-142, June.
    5. Yanrui Wu & Bing Wang, 2007. "Environmental Regulation and Productivity Growth: A Study of the APEC Economies," Economics Discussion / Working Papers 07-17, The University of Western Australia, Department of Economics.

    More about this item


    precios sombra; función distancia; función de ingresos; industria de pavimentos cerámicos; medio ambiente; productividad shadow prices; duality; distance functions; revenue functions; ceramic pavements industry; environment; productivity;

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L68 - Industrial Organization - - Industry Studies: Manufacturing - - - Appliances; Furniture; Other Consumer Durables


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