On estimating shadow prices of undesirable outputs with efficiency models: A literature review
By Peng Zhou, Xun Zhou, Liwei Fan. Applied Energy, 2014
222 citations recorded by the source corpus.
Undesirable outputs (or bads) refer to the byproducts accompanied with desirable outputs (or goods) in a production process, e.g. sulfur dioxide and carbon dioxide in coal-fired power generation. The shadow price of undesirable output, which may be interpreted as the opportunity cost of abating one additional unit of undesirable output in terms of the loss of desirable output, could provide valuable reference information for policy analysis and making. A prevalent practice is to use the Shephard or directional distance function to derive the shadow price, which can be further calculated by parametric or nonparametric efficiency models. In application, earlier studies have estimated shadow prices at plant, sector and even economy levels. This study aims to conduct a systematic review of the studies on estimating shadow prices of undesirable outputs with efficiency models. We first introduce the methodological framework for deriving shadow prices as well as the nonparametric/parametric efficiency models for calculating their values. A systematic summary of over forty earlier studies in this field is then conducted, through which the key features of the existing studies are summarized and possible future research directions are identified.
Subfields: Economics and Econometrics, Finance, Management Science and Operations Research
View Paper: https://www.semanticscholar.org/paper/90f98d1f6d622fa3098c774b1767ff6fca40009c
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Citations in the corpus
- Energy savings potential in China's industrial sector: From the perspectives of factor price distortion and allocative inefficiency (2015, background): “From a perspective of efficiency analysis, Zhou et al. (2014b) examined the optimal control of CO2 emissions.”
- Marginal CO2 abatement costs: Findings from alternative shadow price estimates for Shanghai industrial sectors (2015, methodology): “…of application, which can be applied to the cases of firms, sectors or even regions (Boyd et al., 1996; Coggins and Swinton, 1996; Lee et al., 2014; Zhou et al., 2014b).1 In methodology, the distance function approach may be regarded as an analytical framework consisting of a family of models.”
- Estimating the marginal abatement cost curve of CO2 emissions in China: Provincial panel data analysis (2015, methodology): “Another major strand of the literature employs distance function frameworks to 3 See Zhou et al. (2014b) for a good review of the literature model the environmental production technology.”