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Data Envelopment Analysis in Environmental Valuation: Environmental Performance, Eco-efficiency and Cost-Benefit Analysis

  • Timo Kuosmanen

    (Wageningen University)

  • Mika Kortelainen

    (University of Joensuu)

Data Envelopment Analysis (DEA) is a linear programming based method for evaluating performance of comparable production units such as firms. Although the method is already extensively applied in many areas of economics, its use in environmental economics and related fields remains limited. The purpose of this paper is to present basic principles of DEA and evaluate its application possibilities for a range of environmental valuation problems. We show how DEA has to be adjusted to the context of environmental performance, eco-efficiency and Cost-Benefit analysis (CBA). By modifying the traditional DEA framework to the specific features and purposes of environmental application we show that the valuation principles to which DEA is based on can offer useful insights and complement the conventional toolbox of environmental economists in valuation of the environmental services in general.

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Paper provided by EconWPA in its series Others with number 0409004.

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Date of creation: 10 Sep 2004
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Handle: RePEc:wpa:wuwpot:0409004
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  1. Hailu, Atakelty & Hailu, Atakelty, 2003. "Pollution abatement and productivity performance of regional Canadian pulp and paper industries," Journal of Forest Economics, Elsevier, vol. 9(1), pages 5-25.
  2. 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 374-80, May.
  3. Isabelle Piot-Lepetit & Dominique Vermersch & Robert Weaver, 1997. "Agriculture's environmental externalities: DEA evidence for French agriculture," Applied Economics, Taylor & Francis Journals, vol. 29(3), pages 331-338.
  4. Runar Brännlund & Rolf Färe & Shawna Grosskopf, 1995. "Environmental regulation and profitability: An application to Swedish pulp and paper mills," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 6(1), pages 23-36, July.
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