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Environmental Efficiency Measurement with Translog Distance Functions: A Parametric Approach

  • Cuesta, Rafael A.

    ()

    (Departamento de Economía, Universidad de Oviedo, E-33071, Oviedo, Spain.)

  • Knox, C.A.

    ()

    (Department of Economics, Terry College of Business, University of Georgia, Athens, GA 30602, USA)

  • Zofío, José Luis

    ()

    (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.)

We use a flexible parametric hyperbolic distance function to estimate environmental efficiency when some outputs are undesirable. Cuesta and Zofio (J. Prod. Analysis (2005), 31-48) introduced this distance function specification in conventional input-output space to estimate technical efficiency within a stochastic frontier context. We extend their approach to accommodate undesirable outputs and to estimate environmental efficiency within a stochastic frontier context. This provides a parametric counterpart to Färe et al.’s popular nonparametric environmental efficiency measures (Rev. Econ. Stat. 75 (1989), 90-98). The distance function model is applied to a panel of U.S. electricity generating units that produce marketed electricity and non-marketed SO2 emissions.

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Paper provided by Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History) in its series Working Papers in Economic Theory with number 2007/02.

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Length: 21 pages
Date of creation: Mar 2007
Date of revision:
Handle: RePEc:uam:wpaper:200702
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  1. Carlson, Curtis & Burtraw, Dallas & Cropper, Maureen & Palmer, Karen L., 1998. "Sulfur dioxide control by electric utilities : what are the gains from trade?," Policy Research Working Paper Series 1966, The World Bank.
  2. Murty, M.N. & Kumar, Surender, 2002. "Measuring the cost of environmentally sustainable industrial development in India: a distance function approach," Environment and Development Economics, Cambridge University Press, vol. 7(03), pages 467-486, July.
  3. Fare, Rolf & Grosskopf, Shawna & Zaim, Osman, 2002. "Hyperbolic efficiency and return to the dollar," European Journal of Operational Research, Elsevier, vol. 136(3), pages 671-679, February.
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  5. 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.
  6. Pitt, Mark M. & Lee, Lung-Fei, 1981. "The measurement and sources of technical inefficiency in the Indonesian weaving industry," Journal of Development Economics, Elsevier, vol. 9(1), pages 43-64, August.
  7. 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.
  8. Francesc Hernandez-Sancho & Andres Picazo-Tadeo & Ernest Reig-Martinez, 2000. "Efficiency and Environmental Regulation," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 15(4), pages 365-378, April.
  9. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1973. "Transcendental Logarithmic Production Frontiers," The Review of Economics and Statistics, MIT Press, vol. 55(1), pages 28-45, February.
  10. 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.
  11. Osman Zaim & Fatma Taskin, 2000. "A Kuznets Curve in Environmental Efficiency: An Application on OECD Countries," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 17(1), pages 21-36, September.
  12. Simar, Leopold & Wilson, Paul W., 2007. "Estimation and inference in two-stage, semi-parametric models of production processes," Journal of Econometrics, Elsevier, vol. 136(1), pages 31-64, January.
  13. Catherine J. Morrison Paul & Warren E. Johnston & Gerald A. G. Frengley, 2000. "Efficiency in New Zealand Sheep and Beef Farming: The Impacts of Regulatory Reform," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 325-337, May.
  14. Grosskopf, S. & Margaritis, D. & Valdmanis, V., 1995. "Estimating output substitutability of hospital services: A distance function approach," European Journal of Operational Research, Elsevier, vol. 80(3), pages 575-587, February.
  15. Ball, V. Eldon & Lovell, C.A. Knox & Luu, H. & Nehring, Richard F., 2004. "Incorporating Environmental Impacts in the Measurement of Agricultural Productivity Growth," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 29(03), December.
  16. William L. Weber & Bruce Domazlicky, 2001. "Productivity Growth and Pollution in State Manufacturing," The Review of Economics and Statistics, MIT Press, vol. 83(1), pages 195-199, February.
  17. Bruce Domazlicky & William Weber, 2004. "Does Environmental Protection Lead to Slower Productivity Growth in the Chemical Industry?," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 28(3), pages 301-324, July.
  18. Chambers, Robert G. & Chung, Yangho & Fare, Rolf, 1996. "Benefit and Distance Functions," Journal of Economic Theory, Elsevier, vol. 70(2), pages 407-419, August.
  19. Battese, George E. & Coelli, Tim J., 1988. "Prediction of firm-level technical efficiencies with a generalized frontier production function and panel data," Journal of Econometrics, Elsevier, vol. 38(3), pages 387-399, July.
  20. Jose Zofio & C. A. Knox Lovell, 2001. "Graph efficiency and productivity measures: an application to US agriculture," Applied Economics, Taylor & Francis Journals, vol. 33(11), pages 1433-1442.
  21. Fare, Rolf, et al, 1989. "Multilateral Productivity Comparisons When Some Outputs Are Undesirable: A Nonparametric Approach," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 90-98, February.
  22. Rafael Cuesta & José Zofío, 2005. "Hyperbolic Efficiency and Parametric Distance Functions: With Application to Spanish Savings Banks," Journal of Productivity Analysis, Springer, vol. 24(1), pages 31-48, 09.
  23. Lau, Lawrence J, 1972. "Profit Functions of Technologies with Multiple Inputs and Outputs," The Review of Economics and Statistics, MIT Press, vol. 54(3), pages 281-89, August.
  24. Zofio, Jose L. & Prieto, Angel M., 2001. "Environmental efficiency and regulatory standards: the case of CO2 emissions from OECD industries," Resource and Energy Economics, Elsevier, vol. 23(1), pages 63-83, January.
  25. Ángel M. Prieto & José L. Zofío, 2004. "Stock splits: Modelización de la gestión ambiental preventiva mediante estándares," Investigaciones Economicas, Fundación SEPI, vol. 28(1), pages 43-66, January.
  26. Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
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