Efficiency and Environmental Regulation

Francesc Hernandez-Sancho, Andres Picazo-Tadeo and Ernest Reig-Martínez ()

Environmental & Resource Economics, 2000, vol. 15, issue 4, 365-378

Abstract: This paper proposes an extension of the enhancedefficiency indices of Färe, Grosskopf, Lovell andPasurka (1989) that considers undesirable outputsasymmetrically by assuming that firms can freelydispose of some undesirable productions, but areduction of other bad outputs generates a cost interms of desirable outputs. This methodologicalapproach is used to analyse the relative efficiency ofa sample of Spanish producers of wooden goods andfurnishings whose production process generates fourdifferent wastes. We obtain efficiency indices thatserve to measure the impact on firm performance inseveral scenarios related to environmental regulationsaimed to reduce the production of wastes. Whenenvironmental regulations are assumed, it is foundthat firms would have to sacrifice important amountsof potential desirable output in order to reallocateinputs into waste reduction. Secondly, we find thatfirms associated with a Technological Institute aswell as firms located at a marshallian type industrialdistrict are likely to be less affected byregulations. Copyright Kluwer Academic Publishers 2000

Keywords: bad outputs; efficiency measurement; environment; environmental regulations; industrial districts; wood and furnishings industry (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (35)

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DOI: 10.1023/A:1008359714729

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