IDEAS home Printed from https://ideas.repec.org/p/wrk/warwec/931.html
   My bibliography  Save this paper

On modeling pollution-generating technologies

Author

Listed:
  • Murty, Sushama

    (Department of Economics, University of Warwick)

  • Russell, R. Robert

    (Department of Economics, University of California, Riverside)

Abstract

We distinguish between intended production and residual generation and introduce the concept of by-production. We show that by-production provides the fundamental explanation for the positive correlation that is observed between intended production and residual generation. Most of the existing literature attributes the observed positive correlation to abatement options available to firms. We show that abatement options of firms add to the phenomenon of by-production in strengthening the observed positive correlation. The existing literature usually does not explicitly model abatement options of firms, but considers a reduced form of he technology, which satisfies standard disposability assumptions with respect to all inputs and intended outputs. We show that more than one implicit production relation is needed to capture all the technological trade-offs that are implied by by-production. From our model, we are able to derive a reduced form of the technology that is in the spirit of the one that is usually studied in the literature. However, we nd that our reduced form technology violates standard disposability with respect to inputs and intended outputs that cause pollution. We derive implications from the phenomenon of by-production for the econometric and Data Envelopment Analysis (DEA) speci cations of pollution-generating technologies. We derive a DEA specification of technologies that satisfy by-production. Such a specification can be used to study issues relating to measurement of efficiency, marginal abatement costs, productivity, etc., of firms with technologies that generate pollution. JEL Codes: D20 ; D24 ; D62 ; Q50

Suggested Citation

  • Murty, Sushama & Russell, R. Robert, 2010. "On modeling pollution-generating technologies," The Warwick Economics Research Paper Series (TWERPS) 931, University of Warwick, Department of Economics.
    • Handle: RePEc:wrk:warwec:931
    as

    Download full text from publisher

    File URL: https://warwick.ac.uk/fac/soc/economics/research/workingpapers/2010/twerp_931.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. 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.
    2. Coggins, Jay S. & Swinton, John R., 1996. "The Price of Pollution: A Dual Approach to Valuing SO2Allowances," Journal of Environmental Economics and Management, Elsevier, vol. 30(1), pages 58-72, January.
    3. 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.
    4. Hailu, Atakelty & Veeman, Terrence S., 2000. "Environmentally Sensitive Productivity Analysis of the Canadian Pulp and Paper Industry, 1959-1994: An Input Distance Function Approach," Journal of Environmental Economics and Management, Elsevier, vol. 40(3), pages 251-274, November.
    5. Sushama Murty & R. Robert Russell, 2005. "Externality Policy Reform: A General Equilibrium Analysis," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(1), pages 117-150, February.
    6. 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.
    7. 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(3), pages 467-486, July.
    8. Zhou, P. & Ang, B.W. & Poh, K.L., 2008. "A survey of data envelopment analysis in energy and environmental studies," European Journal of Operational Research, Elsevier, vol. 189(1), pages 1-18, August.
    9. 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.
    10. Cropper, Maureen L & Oates, Wallace E, 1992. "Environmental Economics: A Survey," Journal of Economic Literature, American Economic Association, vol. 30(2), pages 675-740, June.
    11. Barbera, Anthony J. & McConnell, Virginia D., 1990. "The impact of environmental regulations on industry productivity: Direct and indirect effects," Journal of Environmental Economics and Management, Elsevier, vol. 18(1), pages 50-65, January.
    12. Pittman, Russell W, 1983. "Multilateral Productivity Comparisons with Undesirable Outputs," Economic Journal, Royal Economic Society, vol. 93(372), pages 883-891, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Murty, Sushama & Robert Russell, R. & Levkoff, Steven B., 2012. "On modeling pollution-generating technologies," Journal of Environmental Economics and Management, Elsevier, vol. 64(1), pages 117-135.
    2. Dakpo, K Hervé, 2016. "On modeling pollution-generating technologies: a new formulation of the by-production approach," Working Papers 245191, Institut National de la recherche Agronomique (INRA), Departement Sciences Sociales, Agriculture et Alimentation, Espace et Environnement (SAE2).
    3. Sushama Murty, 2012. "On the properties of an emission-generating technology and its parametric representation," Discussion Papers 1202, University of Exeter, Department of Economics.
    4. K Hervé Dakpo, 2016. "On modeling pollution-generating technologies: a new formulation of the by-production approach," Working Papers SMART - LERECO 16-06, INRAE UMR SMART-LERECO.
    5. Jeanneaux, Philippe & Latruffe, Laure, 2016. "Modelling pollution-generating technologies in performance benchmarking: Recent developments, limits and future prospects in the nonparametric frameworkAuthor-Name: Dakpo, K. Hervé," European Journal of Operational Research, Elsevier, vol. 250(2), pages 347-359.
    6. Surender Kumar & Rakesh Kumar Jain, 2020. "Cost of CO2 Emission Mitigation and its Decomposition: Evidence from Coal-fired Thermal Power Sector in India," Working papers 306, Centre for Development Economics, Delhi School of Economics.
    7. Forsund, Finn R., 2009. "Good Modelling of Bad Outputs: Pollution and Multiple-Output Production," International Review of Environmental and Resource Economics, now publishers, vol. 3(1), pages 1-38, August.
    8. Sushama Murty, 2015. "On the properties of an emission-generating technology and its parametric representation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 60(2), pages 243-282, October.
    9. Zhou, P. & Zhou, X. & Fan, L.W., 2014. "On estimating shadow prices of undesirable outputs with efficiency models: A literature review," Applied Energy, Elsevier, vol. 130(C), pages 799-806.
    10. 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(3), pages 1-25, December.
    11. Lee, Sang-choon & Oh, Dong-hyun & Lee, Jeong-dong, 2014. "A new approach to measuring shadow price: Reconciling engineering and economic perspectives," Energy Economics, Elsevier, vol. 46(C), pages 66-77.
    12. Charles, Vincent & Kumar, Mukesh & Irene Kavitha, S., 2012. "Measuring the efficiency of assembled printed circuit boards with undesirable outputs using data envelopment analysis," International Journal of Production Economics, Elsevier, vol. 136(1), pages 194-206.
    13. Dakpo, Hervé K & Jeanneaux, Philippe & Latruffe, Laure, 2014. "Inclusion of undesirable outputs in production technology modeling: The case of greenhouse gas emissions in French meat sheep farming," Working Papers 207806, Institut National de la recherche Agronomique (INRA), Departement Sciences Sociales, Agriculture et Alimentation, Espace et Environnement (SAE2).
    14. Wang, Zhaohua & Feng, Chao, 2015. "Sources of production inefficiency and productivity growth in China: A global data envelopment analysis," Energy Economics, Elsevier, vol. 49(C), pages 380-389.
    15. Atkinson, Scott E. & Dorfman, Jeffrey H., 2005. "Bayesian measurement of productivity and efficiency in the presence of undesirable outputs: crediting electric utilities for reducing air pollution," Journal of Econometrics, Elsevier, vol. 126(2), pages 445-468, June.
    16. Sueyoshi, Toshiyuki & Yuan, Yan & Goto, Mika, 2017. "A literature study for DEA applied to energy and environment," Energy Economics, Elsevier, vol. 62(C), pages 104-124.
    17. Adewale Henry Adenuga & John Davis & George Hutchinson & Trevor Donnellan & Myles Patton, 2019. "Environmental Efficiency and Pollution Costs of Nitrogen Surplus in Dairy Farms: A Parametric Hyperbolic Technology Distance Function Approach," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(3), pages 1273-1298, November.
    18. Surender Kumar & Rakesh Kumar Jain, 0. "Cost of CO2 emission mitigation and its decomposition: evidence from coal-fired thermal power sector in India," Empirical Economics, Springer, vol. 0, pages 1-25.
    19. Yang, Hongliang & Pollitt, Michael, 2010. "The necessity of distinguishing weak and strong disposability among undesirable outputs in DEA: Environmental performance of Chinese coal-fired power plants," Energy Policy, Elsevier, vol. 38(8), pages 4440-4444, August.
    20. Van Ha, Nguyen & Kant, Shashi & Maclaren, Virginia, 2008. "Shadow prices of environmental outputs and production efficiency of household-level paper recycling units in Vietnam," Ecological Economics, Elsevier, vol. 65(1), pages 98-110, March.

    More about this item

    Keywords

    pollution-generating technologies ; free disposability ; weak disposability ; data envelope analysis ; technical efficiency measurement;
    All these keywords.

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wrk:warwec:931. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Margaret Nash). General contact details of provider: https://edirc.repec.org/data/dewaruk.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.