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Cost-constrained measures of environmental efficiency: a material balance approach

Author

Listed:
  • Aldanondo, Ana M.
  • Casasnovas, Valero L.
  • Almansa, M. Carmen

Abstract

Joint cost-environmental efficiency analysis based on the material balance principle (MBP) has an important short-coming, in that the measures of allocative efficiency it produces do not fully integrate environmental and economic outcomes. Their limitation lies in their failure to take into account some decision-making units (DMU) use a combination of inputs that is more environmentally-harmful than that of the least-cost unit, or, more rarely, more costly than that of the least-polluting unit. Input substitution can therefore bring both environmental and economic benefits. This paper develops a method for differentiating between environmental allocative efficiency gains that involve an economic trade-off and those that do not. Drawing insight from the literature on multi-criteria analysis, we extend the MBP approach to new measures of cost-constrained environmental efficiency using data envelopment analysis (DEA). The proposed approach is illustrated by an application geared to assessing the efficiency of a sample of greenhouse horticultural production units in Almeria, Spain. The results for this case show that it is possible to increase environmental allocative efficiency by up to 34 % on average without incurring additional costs.

Suggested Citation

  • Aldanondo, Ana M. & Casasnovas, Valero L. & Almansa, M. Carmen, 2016. "Cost-constrained measures of environmental efficiency: a material balance approach," MPRA Paper 72490, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:72490
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    File URL: https://mpra.ub.uni-muenchen.de/72490/1/MPRA_paper_72490.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Cross constrained cost-environmental efficiency; material balance condition; nitrogen pollution; green house horticulture;

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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