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Measuring Eco-efficiency of Production: A Frontier Approach

Author

Listed:
  • Mika Kortelainen

    (University of Joensuu, Department of Business & Economics)

  • Timo Kuosmanen

    (Wageningen University, Environmental Economics & Natural Resources Group)

Abstract

Eco-efficiency of production is an important concept both from the viewpoint of society and business community; but as yet, there is no unambiguous way to its measurement. The purpose of this paper is to present a general measurement framework based on production theory and the activity analysis approach. Although we exploit the existing methods and techniques, our approach diverges essentially from the usual treatments of the environmental performance of firms in the productive efficiency analysis. The main difference between our approach and the earlier studies is that we build on the definition of eco-efficiency as the ratio of economic value added to the environmental damage index. Related to this orientation, we also approach eco-efficiency from a more aggregate perspective. Our general framework is illustrated by an empirical application to the evaluation of eco-efficiency of road transportation in Finland.

Suggested Citation

  • Mika Kortelainen & Timo Kuosmanen, 2004. "Measuring Eco-efficiency of Production: A Frontier Approach," Econometrics 0411006, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpem:0411006
    Note: Type of Document - pdf; pages: 23
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/em/papers/0411/0411006.pdf
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    References listed on IDEAS

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    1. Konar, Shameek & Cohen, Mark A., 1997. "Information As Regulation: The Effect of Community Right to Know Laws on Toxic Emissions," Journal of Environmental Economics and Management, Elsevier, vol. 32(1), pages 109-124, January.
    2. Kuosmanen, Timo & Cherchye, Laurens & Sipilainen, Timo, 2006. "The law of one price in data envelopment analysis: Restricting weight flexibility across firms," European Journal of Operational Research, Elsevier, vol. 170(3), pages 735-757, May.
    3. Ebert, Udo & Welsch, Heinz, 2004. "Meaningful environmental indices: a social choice approach," Journal of Environmental Economics and Management, Elsevier, vol. 47(2), pages 270-283, March.
    4. Boyd, Gale A. & McClelland, John D., 1999. "The Impact of Environmental Constraints on Productivity Improvement in Integrated Paper Plants," Journal of Environmental Economics and Management, Elsevier, vol. 38(2), pages 121-142, September.
    5. Kerstens, K., 1996. "Technical efficiency measurement and explanation of French urban transit companies," Transportation Research Part A: Policy and Practice, Elsevier, vol. 30(6), pages 431-452, November.
    6. Fare, Rolf & Grosskopf, Shawna & Tyteca, Daniel, 1996. "An activity analysis model of the environmental performance of firms--application to fossil-fuel-fired electric utilities," Ecological Economics, Elsevier, vol. 18(2), pages 161-175, August.
    7. Atakelty Hailu, 2003. "Nonparametric Productivity Analysis with Undesirable Outputs: Reply," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(4), pages 1075-1077.
    8. 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.
    9. 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.
    10. 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.
    11. Laurens Cherchye & & Timo Kuosmanen, 2002. "Benchmarking Sustainable Development: A Synthetic Meta-index Approach," Others 0210001, University Library of Munich, Germany, revised 04 Dec 2002.
    12. Laurens Cherchye, 2001. "Using data envelopment analysis to assess macroeconomic policy performance," Applied Economics, Taylor & Francis Journals, vol. 33(3), pages 407-416.
    13. Timo Kuosmanen & Thierry Post & Timo Sipiläinen, 2004. "Shadow Price Approach to Total Factor Productivity Measurement: With an Application to Finnish Grass-Silage Production," Journal of Productivity Analysis, Springer, vol. 22(1), pages 95-121, July.
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    Citations

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    Cited by:

    1. Picazo-Tadeo, Andrés J. & Castillo-Giménez, Juana & Beltrán-Esteve, Mercedes, 2014. "An intertemporal approach to measuring environmental performance with directional distance functions: Greenhouse gas emissions in the European Union," Ecological Economics, Elsevier, vol. 100(C), pages 173-182.
    2. Picazo-Tadeo, Andrés J. & Beltrán-Esteve, Mercedes & Gómez-Limón, José A., 2012. "Assessing eco-efficiency with directional distance functions," European Journal of Operational Research, Elsevier, vol. 220(3), pages 798-809.
    3. Kortelainen, Mika, 2008. "Dynamic environmental performance analysis: A Malmquist index approach," Ecological Economics, Elsevier, vol. 64(4), pages 701-715, February.
    4. Mika Kortelainen & Timo Kuosmanen, 2007. "Eco-efficiency analysis of consumer durables using absolute shadow prices," Journal of Productivity Analysis, Springer, vol. 28(1), pages 57-69, October.
    5. Beltrán-Esteve, Mercedes & Picazo-Tadeo, Andrés J., 2015. "Assessing environmental performance trends in the transport industry: Eco-innovation or catching-up?," Energy Economics, Elsevier, vol. 51(C), pages 570-580.
    6. Azad, Md Abdus Samad & Liem, Monica & Ancev, Tihomir & Lee, Lisa Yu-Ting, 2008. "Measuring Environmental Performance of Irrigated Cotton Enterprises," 2008 Conference (52nd), February 5-8, 2008, Canberra, Australia 6004, Australian Agricultural and Resource Economics Society.
    7. repec:eee:ejores:v:262:y:2017:i:2:p:733-743 is not listed on IDEAS

    More about this item

    Keywords

    Eco-efficiency; Environmental Pressures; Aggregation; Benefit of the Doubt Weighting; Distance Function; Activity Analysis; Data Envelopment Analysis; Road transportation;

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • Q00 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - General
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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