Efficiency in Managing the Environment and the Opportunity Cost of Pollution Abatement

Subhash Ray and Kankana Mukherjee

No 2007-09, Working papers from University of Connecticut, Department of Economics

Abstract: Using the directional distance function we study a cross section of 110 countries to examine the efficiency of management of the tradeoffs between pollution and income. The DEA model is reformulated to permit 'reverse disposability' of the bad output. Further, we interpret the optimal solution of the multiplier form of the DEA model as an iso-inefficiency line. This permits us to measure the shadow cost of the bad output for a country that is in the interior, rather than on the frontier of the production possibilities set. We also compare the relative environmental performance of countries in terms of emission intensity adjusted for technical efficiency. Only 10% of the countries are found to be on the frontier. Also, there is considerable inter-country variation in the imputed opportunity cost of CO2 reduction. Further, differences in technical efficiency contribute substantially to differences in the observed levels of CO2 intensity.

Keywords: Data Envelopment Analysis; directional distance function; pollution- income tradeoff; shadow price. (search for similar items in EconPapers)
Pages: 30 pages
Date: 2007-04
New Economics Papers: this item is included in nep-agr, nep-eff, nep-ene and nep-env
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:uct:uconnp:2007-09

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