Non-Junk Junk Money: Technical Efficiency and Productivity across Junk and Scrap Dealerships

Some forms of environmentalism has generated many positive responses from concerned communities. Sophisticated theories addressing various aspects of environmental policy abound. At the practical level private economic agents following their self-interests confront the challenge of cleaning up the environment through recycling and other waste management programs. Among these agents are what I call here junk and scrap dealerships. But cleaning up will continue only if the marginal costs and benefits are at least equal. How do these firms fare? This simple question is rarely addressed. This paper examines the technical efficiency and productivity utilizing data for 26 junk and scrap wholesale dealerships in Arizona, USA. It finds that junk and scrap dealerships are technically efficient and productive on average. However, both efficiency and productivity vary widely among dealerships. A reasonable conclusion is that junk and scrap dealership contribute to a clean environment, and that may alone be a sufficient basis for continued investment in these labor-owned/manage- firms. This recommendation proceeds cautiously because available data did not support clear understanding of the economic efficiency and cost structures of firms.