The measurement of environmental economic inefficiency with pollution-generating technologies

Juan Aparicio, Magdalena Kapelko and José Zofío

Resource and Energy Economics, 2020, vol. 62, issue C

Abstract: This study introduces the measurement of environmental inefficiency from an economic perspective. We develop our proposal using the latest by-production models that consider two separate and parallel technologies: a standard technology generating good outputs, and a polluting technology for the by-production of bad outputs. While research into environmental inefficiency incorporating undesirable or bad outputs from a technological perspective is well established, no significant attempts have been made to extend it to the economic sphere. Based on the definition of net profits, we develop an economic inefficiency measure that accounts for suboptimal behavior in the form of foregone private revenue and environmental cost excess. We show that economic inefficiency can be consistently decomposed according to technical and allocative criteria, considering the two separate technologies and market prices, respectively. We illustrate the empirical implementation of our approach using a dataset on agriculture at the level of US states.

Keywords: Environmental economic inefficiency; Pollution-generating technologies; Technical and allocative efficiency measurement; Data envelopment analysis; US agriculture (search for similar items in EconPapers)
JEL-codes: D20 D24 N52 Q50 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Working Paper: The Measurement of Environmental Economic Inefficiency with Pollution-generating Technologies (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:resene:v:62:y:2020:i:c:s0928765519302258

DOI: 10.1016/j.reseneeco.2020.101185

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