On modeling pollution-generating technologies

By Sushama Murty, R. Russell, Steven Levkoff. 2012

501 citations recorded by the source corpus.

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

Subfields: Economics and Econometrics, Environmental Engineering, Management Science and Operations Research

View Paper: https://www.semanticscholar.org/paper/ff2a12fe694e3703540eb38cd26d3d42fb662496

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

In Environmental Engineering

In Management Science and Operations Research

Citations in the corpus

Potential gains from carbon emissions trading in China: A DEA based estimation on abatement cost savings (2016, methodology): “…since the VRS assumption is not directly linked with weak disposability assumption (Färe and Grosskopf 2003; Kuosmanen, 2005; Zhou et al., 2008; Murty et al., 2012) which is utilized for modeling CO2 emissions in this study, the DEA based potential gains estimation models that satisfy these…”
Energy-related CO2 emission in European Union agriculture: Driving forces and possibilities for reduction (2016, methodology): “In the latter case, Data Envelopment Analysis (DEA) is employed to estimate the production frontier as well as the distance functions [56,69,70].”