Halkos, George and Tzeremes, Nickolaos (2012): A conditional directional distance function approach for measuring regional environmental efficiency: Evidence from the UK regions.

PDF
MPRA_paper_38147.pdf Download (603kB)  Preview 
Abstract
This paper, by using conditional directional distance functions as introduced by Simar and Vanhems [J. Econometrics 166 (2012) 342354] modifies the model by Färe and Grosskopf [Eur. J. Operat. Res. 157 (2004) 242245], examines the link between regional environmental efficiency and economic growth. The proposed model using conditional directional distance functions incorporates the effect of regional economic growth on regions’ environmental efficiency levels. The results from the UK regional data reveal that economic growth has a negative effect on regions’ environmental performance up to a certain GDP per capita level, where after that point the effect becomes positive. This indicates the existence of a Kuznets type relationship between the UK regions’ environmental performance and economic growth.
Item Type:  MPRA Paper 

Original Title:  A conditional directional distance function approach for measuring regional environmental efficiency: Evidence from the UK regions 
Language:  English 
Keywords:  Regional environmental performance; Directional distance function; Conditional measures; U.K. regions 
Subjects:  R  Urban, Rural, Regional, Real Estate, and Transportation Economics > R1  General Regional Economics > R10  General Q  Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5  Environmental Economics > Q50  General C  Mathematical and Quantitative Methods > C1  Econometric and Statistical Methods and Methodology: General > C14  Semiparametric and Nonparametric Methods: General Q  Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5  Environmental Economics > Q56  Environment and Development ; Environment and Trade ; Sustainability ; Environmental Accounts and Accounting ; Environmental Equity ; Population Growth C  Mathematical and Quantitative Methods > C6  Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C60  General 
Item ID:  38147 
Depositing User:  G.E. Halkos 
Date Deposited:  16. Apr 2012 18:54 
Last Modified:  09. Sep 2015 20:20 
References:  Ali, A.I., Lerme, C.S., Seiford, L.M., 1995. Components of efficiency evaluation in data envelopment analysis. European Journal of Operational Research 80, 462–473. Bădin, L., Daraio, C., Simar, L., 2010. Optimal bandwidth selection for conditional efficiency measures: A Datadriven approach. European Journal of Operational Research 201, 633640. Banker, R.D., Morey, R.C., 1986. Efficiency analysis for exogenously fixed inputs and outputs. Operations Research 34, 513–521 Banker, R.D., Natarajan, R., 2008. Evaluating contextual variables affecting productivity using data envelopment analysis. Operations Research 56, 48–58. Bian, Y., Yang, F., 2010. Resource and environment efficiency analysis of provinces in China: A DEA approach based on Shannon’s entropy. Energy Policy 38, 19091917. Brajer, V., Mead, R.W., Xiao, F., 2011. Searching for an Environmental Kuznets Curve in China's air pollution. China Economic Review 22, 383397. Cazals, C., Florens, J.P., Simar, L., 2002. Nonparametric frontier estimation: a robust approach. Journal of Econometrics 106, 125. Chung, Y.H., Färe, R., Grosskopf, S., 1997. Productivity and undesirable outputs: A directional distance function approach. Journal of Environmental Management 51, 229– 240. Daraio, C., Simar, L., 2005. Introducing environmental variables in nonparametric frontier models: a probabilistic approach. Journal of Productivity Analysis 24, 93–121 Daraio, C., Simar, L., 2006. A robust nonparametric approach to evaluate and explain the performance of mutual funds. European Journal of Operational Research 175, 516–542. Daraio, C., Simar, L., 2007. Conditional nonparametric frontier models for convex and nonconvex technologies: a unifying approach. Journal of Productivity Analysis 28, 13–32 De White, K., Verschelde, M., 2010. Estimating and explaining efficiency in a multilevel setting: A robust twostage approach. TIER working paper series, TIER WP 10/04, Top Institute for Evidence Based Education Research, University of Amsterdam, Maastricht University, University of Groningen. Diao, X.D., Zeng, S.X., Tam, C.M., Tam, V.W.Y., 2009. EKC analysis for studying economic growth and environmental quality: A case study in China. Journal of Cleaner Production 17, 541–548. Epstein, L., Denny, M., 1980. Endogenous capital utilization in a shortrun production model. Journal of Econometrics 12, 189207. Färe, R., Grosskopf, S., 2003. Nonparametric Productivity Analysis with Undesirable Outputs: Comment. American Journal of Agricultural Economics 85, 1070–74. Färe, R., Grosskopf, S., 2009. A Comment on Weak Disposability in Nonparametric Production Analysis. American Journal of Agricultural Economics 91, 535538. Färe, R., Grosskopf, S., HernandezSancho, F., 2004. Environmental performance: an index number approach. Resource & Energy Economics 26, 343–352. Färe, R., Grosskopf, S., Tyteca D., 1996. An activity analysis model of the environment performance of firms: application to fossilfuelfired electric utilities. Ecological Economics 18, 161–175. Färe, R., Grosskopf, S., 2004. Modeling undesirable factors in efficiency evaluation: Comment. European Journal of Operational Research 157, 242245. Färe, R., Grosskopf, S., Lovell, C.A.K., Pasurka, C., 1989. Multilateral productivity comparisons when some outputs are undesirable. Review of Economics and Statistics 71, 90–98. Färe, R., Primont, D., 1995. MultiOutput Production and Duality: Theory and Applications. Kluwer Academic Publishers, Boston. Feldstein, M.S., Foot, D.K., 1971. The other half of gross investment: replacement and modernization expenditures. Review of Economics and Statistics 53, 4958. Grossman, G.M., Krueger, A.B., 1995. Economic growth and the environment. Quarterly Journal of Economics 33, 353377. Guo, X.D., Zhu, L., Fan, X., Xie, B.C., 2011. Evaluation of potential reductions in carbon emissions in Chinese provinces based on environmental DEA. Energy Policy 39, 23522360. Hailu, A., 2003. Nonparametric Productivity Analysis with Undesirable Outputs: Reply. American Journal of Agricultural Economics 85, 1075–1077. Hailu A., Veeman, T.S., 2001. Nonparametric Productivity Analysis with Undesirable Outputs: An Application to the Canadian Pulp and Paper Industry. American Journal of Agricultural Economics 83, 605–616. Halkos, G.E., Tzeremes, N.G., 2009. Exploring the existence of Kuznets curve in countries' environmental efficiency using DEA window analysis. Ecological Economics 68, 21682176. Halkos, G.E., Tzeremes, N.G., 2011. Modelling regional welfare efficiency applying conditional full frontiers. Spatial Economic Analysis 6, 451471. Halkos, G.E., Tzeremes, N.G., 2012. Measuring German regions’ environmental efficiency: a directional distance function approach. Letters in Spatial and Resource Sciences 5, 716. Hall, P., Racine, J.S., Li, Q. 2004. Crossvalidation and the estimation of conditional probability densities. Journal of the American Statistical Association 99, 1015–1026. Hayfield, T., Racine, J.S. 2008. Nonparametric Econometrics: The np Package. Journal of Statistical Software 27, 132. He, J., 2008. China's industrial SO2 emissions and its economic determinants: EKC's reduced vs. structural model and the role of international trade. Environment and Development Economics 14, 227–262. Hoff, A., 2007. Second stage DEA: comparison of approaches for modelling the DEA score. European Journal of Operational Research 181, 425–435. Jeong, S.O., Park, B.U., Simar, L., 2010. Nonparametric conditional efficiency measures: asymptotic properties. Annals of Operations Research 173, 105122. Knill, C., Lenschow, A., 1998. Coping with Europe: the impact of British and German administrations on the implementation of EU environmental policy. Journal of European Public Policy 5, 595614. Korhonen, P., Luptacik, M., 2004. Ecoefficiency analysis of power plants: an extension of data envelopment analysis. European Journal of Operational Research 154, 437–446. Kuosmanen, T., 2005. Weak disposability in nonparametric production analysis with undesirable outputs. American Journal of Agricultural Economics 87, 10771082. Kuosmanen, T., Podinovski, V., 2009. Weak disposability in nonparametric production analysis: reply to Färe and Grosskopf. American Journal of Agricultural Economics 91, 539545. Kuznets, S., 1955. Economic growth and income inequality. American Economic Review 45, 128. Li, Q., Racine, J.S., 2007. Nonparametric econometrics: Theory and practice. Princeton University Press, Oxford. Macpherson, A.J., Principe, P.P., Smith, E.R., 2010. A directional distance function approach to regional environmental economic assessments. Ecological Economics 69, 19181925. Managi, S., Jena, P.R., 2008. Environmental productivity and Kuznets curve in India. Ecological Economics 65, 432440. Managi, S., 2006. Are there increasing returns to pollution abatement? Empirical analytics of the Environmental Kuznets Curve in pesticides. Ecological Economics 58, 617636. Mandal, S.K., Madheswaran, S., 2010. Environmental efficiency of the Indian cement industry: An interstate analysis. Energy Policy 38,11081118. McDonald, J., 2009, Using least squares and tobit in second stage dea efficiency analyses. European Journal of Operational Research 197,792–798. Nadaraya, E.A., 1964. On Estimating Regression. Theory of Probability and its Applications 9, 141–142. Park, B.U., Simar, L., Zelenyuk, V., 2008. Local likelihood estimation of truncated regression and its partial derivative: Theory and application. Journal of Econometrics 146, 185–2008. PicazoTade, A., GarcíaReche, A., 2007. What makes environmental performance differ between firms? Empirical evidence from the Spanish tile industry. Environment and Planning A 39, 2232–2247. Racine, J.S., 1997. Consistent significance testing for nonparametric regression. Journal of Business and Economic Statistics 15, 369–379. Racine, J.S., 2008. Nonparametric Econometrics: A Primer. Foundation and Trends in Econometrics 3, 188. Racine, J.S., Hart, J.D., Li, Q., 2006. Testing the significance of categorical predictor variables in nonparametric regression models. Econometric Reviews 25, 523–544. Reinhard, S., Lovell, C.A.K., Thijssen, G., 2000. Environmental efficiency with multiple environmentally detrimental variables estimated with SFA and DEA. European Journal of Operational Research 121, 287–303. Seiford, L.M., Zhu, J., 1998. Identifying excesses and deficits in chinese industrial productivity (1953–1990): A weighted data envelopment analysis approach. OmegaInternational Journal of Management Science 26, 269–279. Seiford, L.M., Zhu, J., 2002. Modeling undesirable factors in efficiency evaluation. European Journal of Operational Research 142, 16–20. Seiford, L.M., Zhu, J., 2005. A response to comments on modeling undesirable factors in efficiency evaluation. European Journal of Operational Research 161, 579–581. Selden, T., Song, D., 1994. Environmental quality and development: is there a Kuznets curve for air pollution emissions? Journal of Environmental Economics and Management 27, 147162. Shephard, R.W., 1970. Theory of Cost and Production Functions. Princeton University Press, Princeton, NJ. Shi, G.M., Bi, J., Wang, J.N., 2010. Chinese regional industrial energy efficiency evaluation based on a DEA model of fixing nonenergy inputs. Energy Policy 38, 61726179. Simar, L., Wilson, P.W., 2007. Estimation and inference in twostage, semiparametric models of productive efficiency. Journal of Econometrics 136:31–64. Simar, L., Wilson, P.W., 2011. Twostage DEA: caveat emptor. Journal of Productivity Analysis 36, 205218. Simar, L., Vanhems, A., 2012. Probabilistic characterization of directional distances and their robust versions. Journal of Econometrics 166, 342354. Taskin, F., Zaim, O., 2001. The role of international trade on environmental efficiency: a DEA approach. Economic Modelling 18, 117. Thrall, R.M., 1996. Duality, classification and slacks in DEA. Annals of Operations Research 66, 109–138. Tyteca, D., 1997. Linear programming models for the measurement of environmental performance of firms: concepts and empirical results. Journal of Productivity Analysis 8, 175–189. Tyteca, D., 1996. On the Measurement of the Environmental Performance of Firms A Literature Review and a Productive Efficiency Perspective. Journal of Environmental Management 46, 281 308. Wang K., Yu, S., Zhang, W., 2012. China’s regional energy and environmental efficiency: A DEA window analysis based dynamic evaluation. Mathematical and Computer Modelling. doi:10.1016/j.mcm.2011.11.067. Watanabe, M., Tanaka, K., 2007. Efficiency analysis of Chinese industry: A directional distance function approach. Energy Policy 35, 63236331. Watson, G.S., 1964. Smooth regression analysis. Sankhya 26, 359–372. Yörük, B.K., Zaim, O., 2006. The Kuznets curve and the effect of international regulations on environmental efficiency. Economics Bulletin 17, 17. Zaim, O., 2004. Measuring environmental performance of state manufacturing through changes in pollution intensities: a DEA framework. Ecological Economics, 48, 3747. Zaim, O., Taskin, F., 2000a. Environmental efficiency in carbon dioxide emissions in the OECD: A nonparametric approach. Journal of Environmental Management 58, 95–107. Zaim, O., Taskin, F., 2000b. Searching for a Kuznets curve in environmental efficiency using kernel estimation. Economics Letters 68, 217–223. Zaim, O., Taskin, F., 2000c. A Kuznets curve in environmental efficiency: an application on OECD countries. Environmental and Resource Economics 17, 2136. Zelenyuk, V., Zheka, V., 2006. Corporate governance and firm’s efficiency: the case of a transitional country, Ukraine. Journal of Productivity Analysis 25, 143157. Zhou, P., Ang, B.W., Poh, K.L., 2006. Slacksbased efficiency measures for modelling environmental performance. Ecological Economics 60, 111–118. Zhou, P., Poh, K.L., Ang, B.W., 2007. A nonradial DEA approach to measuring environmental performance. European Journal of Operational Research 178, 1–9. Zofio, J.L., Prieto, A.M., 2001. Environmental efficiency and regulatory standards: the case of CO2 emissions from OECD industries. Resource and Energy Economics 23, 63–83. 
URI:  https://mpra.ub.unimuenchen.de/id/eprint/38147 