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Productivity and Undesirable Outputs: A Directional Distance Function Approach

Author

Listed:
  • Yangho Chung

    (Southern Illinois Univ. at Carbondale)

  • Rolf Fare

    (Southern Illinois Univ. at Carbondale)

Abstract

Undesirable outputs are often produced together with desirable outputs. This joint production of good and bad outputs brings about a difficulty for productivity measurement. Here we introduce a directional distance function and use it as a component in a new productivity index. This index, as an empirical example shows, seems to solve the problem caused by the joint production of good and bad outputs.

Suggested Citation

  • Yangho Chung & Rolf Fare, 1995. "Productivity and Undesirable Outputs: A Directional Distance Function Approach," Microeconomics 9511002, EconWPA, revised 09 Nov 1995.
  • Handle: RePEc:wpa:wuwpmi:9511002
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    References listed on IDEAS

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    1. Fare, R. & Grosskopf, S. & Pasurka, C., 1986. "Effects on relative efficiency in electric power generation due to environmental controls," Resources and Energy, Elsevier, vol. 8(2), pages 167-184, June.
    2. Runar Brannlund & Yangho Chung & Rolf Fare & Shawna Grosskopf, 1995. "Emissions Trading and Profitability: The Swedish Pulp and Paper Industry," Others 9506001, EconWPA.
    3. Fare, Rolf, et al, 1993. "Derivation of Shadow Prices for Undesirable Outputs: A Distance Function Approach," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 374-380, May.
    4. Luenberger, David G., 1992. "Benefit functions and duality," Journal of Mathematical Economics, Elsevier, vol. 21(5), pages 461-481.
    5. Caves, Douglas W & Christensen, Laurits R & Diewert, W Erwin, 1982. "The Economic Theory of Index Numbers and the Measurement of Input, Output, and Productivity," Econometrica, Econometric Society, vol. 50(6), pages 1393-1414, November.
    6. 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.
    7. Pittman, Russell W, 1983. "Multilateral Productivity Comparisons with Undesirable Outputs," Economic Journal, Royal Economic Society, vol. 93(372), pages 883-891, December.
    8. Briec, W., 1995. "A Graph Type Extension of Farrell Technical Efficiency Measure," G.R.E.Q.A.M. 95a28, Universite Aix-Marseille III.
    9. Chambers, Robert G. & Chung, Yangho & Fare, Rolf, 1996. "Benefit and Distance Functions," Journal of Economic Theory, Elsevier, vol. 70(2), pages 407-419, August.
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    Cited by:

    1. Subhash C. Ray & Kankana Mukherjee, 2007. "Efficiency in Managing the Environment and the Opportunity Cost of Pollution Abatement," Working papers 2007-09, University of Connecticut, Department of Economics.
    2. repec:eee:rensus:v:75:y:2017:i:c:p:668-676 is not listed on IDEAS
    3. repec:gam:jsusta:v:9:y:2017:i:4:p:637-:d:96069 is not listed on IDEAS
    4. Alfredsson, Eva & Månsson, Jonas & Vikström, Peter, 2016. "Internalising external environmental effects in efficiency analysis," Economic Analysis and Policy, Elsevier, vol. 51(C), pages 22-31.
    5. David I. Stern, 2004. "Diffusion of Emissions Abating Technology," Rensselaer Working Papers in Economics 0420, Rensselaer Polytechnic Institute, Department of Economics.

    More about this item

    Keywords

    productivity & efficiency measurement; joint products; distance functions;

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D2 - Microeconomics - - Production and Organizations
    • D3 - Microeconomics - - Distribution
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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