IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/64877.html
   My bibliography  Save this paper

Bayesian Approach to Disentangling Technical and Environmental Productivity

Author

Listed:
  • Malikov, Emir
  • Kumbhakar, Subal C.
  • Tsionas, Efthymios G.

Abstract

This paper models the firm's production process as a system of simultaneous technologies for desirable and undesirable outputs. Desirable outputs are produced by transforming inputs via the conventional transformation function, whereas (consistent with the material balance condition) undesirable outputs are by-produced via the so-called "residual generation technology". By separating the production of undesirable outputs from that of desirable outputs, not only do we ensure that undesirable outputs are not modeled as inputs and thus satisfy costly disposability, but we are also able to differentiate between the traditional (desirable-output-oriented) technical productivity and the undesirable-output-oriented environmental, or so-called "green", productivity. To measure the latter, we derive a Solow-type Divisia environmental productivity index which, unlike conventional productivity indices, allows crediting the ceteris paribus reduction in undesirable outputs. Our index also provides a meaningful way to decompose environmental productivity into environmental technological and efficiency changes.

Suggested Citation

  • Malikov, Emir & Kumbhakar, Subal C. & Tsionas, Efthymios G., 2015. "Bayesian Approach to Disentangling Technical and Environmental Productivity," MPRA Paper 64877, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:64877
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/64877/1/MPRA_paper_64877.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Fernandez C. & Koop G. & Steel M.F.J., 2002. "Multiple-Output Production With Undesirable Outputs: An Application to Nitrogen Surplus in Agriculture," Journal of the American Statistical Association, American Statistical Association, vol. 97, pages 432-442, June.
    2. Färe, Rolf & Grosskopf, Shawna, 2010. "Directional distance functions and slacks-based measures of efficiency: Some clarifications," European Journal of Operational Research, Elsevier, vol. 206(3), pages 702-702, November.
    3. William A. Barnett & Michael Wolfe, 2004. "Semi-nonparametric Bayesian Estimation of the Asymptotically Ideal Production Model1," Contributions to Economic Analysis, in: Functional Structure and Approximation in Econometrics, pages 303-349, Emerald Group Publishing Limited.
    4. Murty, Sushama & Russell, R. Robert, 2010. "On modeling pollution-generating technologies," Economic Research Papers 271176, University of Warwick - Department of Economics.
    5. 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.
    6. Pasurka, Carl Jr., 2006. "Decomposing electric power plant emissions within a joint production framework," Energy Economics, Elsevier, vol. 28(1), pages 26-43, January.
    7. O'Donnell, Christopher J. & Coelli, Timothy J., 2005. "A Bayesian approach to imposing curvature on distance functions," Journal of Econometrics, Elsevier, vol. 126(2), pages 493-523, June.
    8. William A. Barnett, 2004. "Tastes and Technology: Curvature Is Not Sufficient for Regularity," Contributions to Economic Analysis, in: Functional Structure and Approximation in Econometrics, pages 429-433, Emerald Group Publishing Limited.
    9. Atkinson, Scott E. & Dorfman, Jeffrey H., 2005. "Bayesian measurement of productivity and efficiency in the presence of undesirable outputs: crediting electric utilities for reducing air pollution," Journal of Econometrics, Elsevier, vol. 126(2), pages 445-468, June.
    10. Feng, Guohua & Serletis, Apostolos, 2014. "Undesirable outputs and a primal Divisia productivity index based on the directional output distance function," Journal of Econometrics, Elsevier, vol. 183(1), pages 135-146.
    11. Atakelty Hailu & Terrence S. Veeman, 2001. "Non-parametric Productivity Analysis with Undesirable Outputs: An Application to the Canadian Pulp and Paper Industry," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(3), pages 605-616.
    12. 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.
    13. Efthymios G. Tsionas & Subal C. Kumbhakar, 2014. "FIRM HETEROGENEITY, PERSISTENT AND TRANSIENT TECHNICAL INEFFICIENCY: A GENERALIZED TRUE RANDOM‐EFFECTS model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 29(1), pages 110-132, January.
    14. Fare, Rolf & Grosskopf, Shawna & Noh, Dong-Woon & Weber, William, 2005. "Characteristics of a polluting technology: theory and practice," Journal of Econometrics, Elsevier, vol. 126(2), pages 469-492, June.
    15. Fernandez, Carmen & Koop, Gary & Steel, Mark F.J., 2005. "Alternative efficiency measures for multiple-output production," Journal of Econometrics, Elsevier, vol. 126(2), pages 411-444, June.
    16. Reinhard, Stijn & Knox Lovell, C. A. & Thijssen, Geert J., 2000. "Environmental efficiency with multiple environmentally detrimental variables; estimated with SFA and DEA," European Journal of Operational Research, Elsevier, vol. 121(2), pages 287-303, March.
    17. Färe, Rolf & Grosskopf, Shawna, 2010. "Directional distance functions and slacks-based measures of efficiency," European Journal of Operational Research, Elsevier, vol. 200(1), pages 320-322, January.
    18. Stijn Reinhard & C.A. Knox Lovell & Geert Thijssen, 1999. "Econometric Estimation of Technical and Environmental Efficiency: An Application to Dutch Dairy Farms," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(1), pages 44-60.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Emir Malikov & Subal C. Kumbhakar & Mike G. Tsionas, 2016. "A Cost System Approach to the Stochastic Directional Technology Distance Function with Undesirable Outputs: The Case of us Banks in 2001–2010," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 31(7), pages 1407-1429, November.
    2. Sushama Murty & R. Robert Russell, "undated". "Bad Outputs," Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi Discussion Papers 17-06, Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi, India.
    3. Finn R. Førsund, 2018. "Multi-equation modelling of desirable and undesirable outputs satisfying the materials balance," Empirical Economics, Springer, vol. 54(1), pages 67-99, February.
    4. Emir Malikov & Raushan Bokusheva & Subal C. Kumbhakar, 2018. "A hedonic-output-index-based approach to modeling polluting technologies," Empirical Economics, Springer, vol. 54(1), pages 287-308, February.
    5. Sushama Murty & Resham Nagpal, "undated". "Weighted index of graph efficiency improvements for a by-production technology and its application to Indian coal-based thermal power sector," Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi Discussion Papers 18-08, Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi, India.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Emir Malikov & Raushan Bokusheva & Subal C. Kumbhakar, 2018. "A hedonic-output-index-based approach to modeling polluting technologies," Empirical Economics, Springer, vol. 54(1), pages 287-308, February.
    2. 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.
    3. Magambo, Isaiah & Dikgang, Johane & Gelo, Dambala & Tregenna, Fiona, 2021. "Environmental and Technical Efficiency in Large Gold Mines in Developing Countries," MPRA Paper 108068, University Library of Munich, Germany.
    4. Holtkamp, A.M. & Brummer, B., 2018. "Environmental efficiency of smallholder rubber production," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277518, International Association of Agricultural Economists.
    5. 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.
    6. Feng, Guohua & Serletis, Apostolos, 2014. "Undesirable outputs and a primal Divisia productivity index based on the directional output distance function," Journal of Econometrics, Elsevier, vol. 183(1), pages 135-146.
    7. Behrouz Arabi & Susila Munisamy Doraisamy & Ali Emrouznejad & Alireza Khoshroo, 2017. "Eco-efficiency measurement and material balance principle: an application in power plants Malmquist Luenberger Index," Annals of Operations Research, Springer, vol. 255(1), pages 221-239, August.
    8. Magambo, Isaiah Hubert & Dikgang, Johane & Gelo, Dambala & Tregenna, Fiona, 2021. "Dynamic Technical and Environmental Efficiency Performance of Large Gold Mines in Developing Countries," EconStor Preprints 235859, ZBW - Leibniz Information Centre for Economics.
    9. Bokusheva, Raushan & Kumbhakar, Subal C., 2014. "A Distance Function Model with Good and Bad Outputs," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182765, European Association of Agricultural Economists.
    10. Sushama Murty & Resham Nagpal, "undated". "Measuring output-based technical efficiency of Indian coal-based thermal power plants: A by-production approach," Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi Discussion Papers 18-07, Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi, India.
    11. Gary Koop & Lise Tole, 2008. "What is the environmental performance of firms overseas? An empirical investigation of the global gold mining industry," Journal of Productivity Analysis, Springer, vol. 30(2), pages 129-143, October.
    12. Subal C. Kumbhakar & Emir Malikov, 2018. "Good modeling of bad outputs: editors’ introduction," Empirical Economics, Springer, vol. 54(1), pages 1-6, February.
    13. Leleu, Hervé, 2013. "Shadow pricing of undesirable outputs in nonparametric analysis," European Journal of Operational Research, Elsevier, vol. 231(2), pages 474-480.
    14. Puggioni, Daniela & Stefanou, Spiro E., 2016. "The Value of Being Socially Responsible. A DEA Approach for Analyzing Efficiency and Recovering Shadow Prices of CSR Activities," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235723, Agricultural and Applied Economics Association.
    15. Neophyta Empora, 2017. "Air pollution spillovers and U.S. state productivity growth," University of Cyprus Working Papers in Economics 06-2017, University of Cyprus Department of Economics.
    16. Kenneth Rødseth, 2014. "Efficiency measurement when producers control pollutants: a non-parametric approach," Journal of Productivity Analysis, Springer, vol. 42(2), pages 211-223, October.
    17. Halkos, George & Petrou, Kleoniki Natalia, 2019. "Treating undesirable outputs in DEA: A critical review," Economic Analysis and Policy, Elsevier, vol. 62(C), pages 97-104.
    18. Hampf, Benjamin & Rødseth, Kenneth Løvold, 2019. "Environmental efficiency measurement with heterogeneous input quality: A nonparametric analysis of U.S. power plants," Energy Economics, Elsevier, vol. 81(C), pages 610-625.
    19. Levent Kutlu, 2020. "Greenhouse Gas Emission Efficiencies of World Countries," IJERPH, MDPI, vol. 17(23), pages 1-11, November.
    20. Ke Wang & Yujiao Xian & Chia-Yen Lee & Yi-Ming Wei & Zhimin Huang, 2019. "On selecting directions for directional distance functions in a non-parametric framework: a review," Annals of Operations Research, Springer, vol. 278(1), pages 43-76, July.

    More about this item

    Keywords

    bad output; by-production; efficiency; MCMC; productivity;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:64877. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.