Technical efficiency, productivity change and environmental degradation

Halkos, George and Bampatsou, Christina (2017): Technical efficiency, productivity change and environmental degradation.

Abstract

This study deals with the nonparametric frontier analysis in the case of the EU 28 countries for a period spanning from 1993 to 2012. It provides statistical inference about the radial output based measure of technical efficiency under the assumption of Constant Returns to Scale (CRS) and it performs scale analysis that allows determining the nature of scale inefficiency of each data point. Furthermore, an order-α approach is developed for determining partial frontiers. Both traditional Malmquist-Luenberger and bootstrapped Malmquist productivity indexes between 1993 and 2012 are constructed. Analysis of productivity change by decomposing the Total Factor Productivity Index into Efficiency Change and Technical Change is performed showing respectively whether productivity gains derive mainly from improvements in efficiency or are mostly the result of technological progress.

• Item Type: MPRA Paper
• Language: English
• Keywords: Data envelopment analysis; Environmental Economics; Carbon emissions; Eco-Efficiency; Total factor productivity index.
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O57 - Comparative Studies of Countries; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q0 - General > Q01 - Sustainable Development; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q40 - General; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q43 - Energy and the Macroeconomy; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q48 - Government Policy; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q50 - General; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q58 - Government Policy; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics > R15 - Econometric and Input-Output Models ; Other Models

References

Apergis, Nicholas, Goodness C. Aye, Carlos Pestana Barros, Rangan Gupta, and Peter Wanke. (2015). Energy efficiency of selected OECD countries: A slacks based model with undesirable outputs, Energy Economics, 51: 45-53.

Bădin, L., Daraio, C. and Simar, L. (2012). How to measure the impact of environmental factors in a nonparametric production model?, European Journal of Operational Research, 223: 818–833.

Banker, R. D., A. Charnes, and W. W. Cooper (1984). Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis. Management Science, 30: 1078–1092.

Caves, D., Christensen, L. and Diewert, W.E. (1982). The economic theory of index numbers and the measurement of input, output, and productivity, Econometrica, 50: 1393–1414.

Charnes, A., Cooper, W.W. and Rhodes E. (1978) Measuring efficiency of decision making units, European Journal of Operational Research, 2(6): 429–444.

Chung, Y., Färe, R. and Grosskopf, S. (1997) Productivity and undesirable outputs: a directional function approach, Journal of Environmental Management, 51(3): 229– 240.

Daraio, C. and Simar, L. (2005) Introducing environmental variables in nonparametric frontier models: A probabilistic approach, Journal of Productivity Analysis, 24(1): 93–121.

Daraio, C. and Simar, L. (2007a) Advanced robust and nonparametric methods in efficiency analysis, New York: Springer.

Daraio, C. and Simar, L. (2007b) Conditional nonparametric frontier models for convex and nonconvex technologies: a unifying approach, Journal of Productivity Analysis, 28(1): 13-32.

Efron, B. (1979). Bootstrap methods: Another look at the Jackknife. Annals of Statistics, 7: 1-26.

Efron, B, and Tibshirani, R.J. (1993). An introduction to the bootstrap. Chapman and Hall, London.

Fare, R. (1988). Fundumentals of Production Theory. Berlin: Springer.

Fare, R., and C. A. K. Lovell. (1994). Measuring the technical efficiency of production. Journal of Economic Theory, 19: 150–162.

Färe, Rolf., Shawna Grosskopf, and C. A. Knox Lovell. (1994a). Production Frontiers, Cambridge: Cambridge University Press.

Halkos G. (2011). Environment and economic development: determinants of an EKC hypothesis," MPRA Paper 33262, University Library of Munich, Germany.

Halkos G. (2015). Climate change actions for sustainable development, International Journal of Innovation and Sustainable Development, 9(2): 118-136.

Halkos G, Tzeremes N. (2009) Exploring the existence of Kuznets curve in countries' environmental efficiency using DEA window analysis. Ecological Economics, 68: 2168-2176.

Halkos, G. and Tzeremes, N. (2011). Does the Kyoto Protocol Agreement Matters? An Environmental Efficiency Analysis, MPRA, Paper No. 30652, May 2011.

Halkos, G. and Polemis, M. (2016). The good, the bad and the ugly? Balancing environmental and economic impacts towards efficiency, MPRA Paper 72132, University Library of Munich, Germany.

Halkos G. and Skouloudis A. (2015). Exploring corporate disclosure on climate change: Evidence from the Greek business sector, MPRA Paper 64566, University Library of Munich, Germany.

Halkos G. and Tsilika K. (2014). Analyzing and visualizing the synergistic impact mechanisms of climate change related costs. Applied Mathematics and Computation, 246: 586-596.

Halkos G. and Tsilika K. (2016). Climate change impacts: Understanding the synergetic interactions using graph computing, MPRA Paper 75037, University Library of Munich, Germany.

Halkos G. and Tsilika K. (2017). Climate change effects and their interactions: An analysis aiming at policy implications. Economic Analysis and Policy, 53: 140-146.

Jeong, S.O., Park, B.U. and Simar, L. (2010) Nonparametric conditional efficiency measures: asymptotic properties, Annals of Operational Research, 173(1): 105- 122.

Kortelainen, M., (2008). Dynamic environmental performance analysis: A Malmquist index approach, Ecological Economics, 64(4): 701–715.

Kumar S, Khanna M. (2009) Measurement of environmental efficiency and productivity: a cross-country analysis. Environment and Development Economics, 14: 473–495.

Long, Xingle, Xicang Zhao, and Faxin Cheng. (2015). The comparison analysis of total factor productivity and eco-efficiency in China's cement manufactures, Energy Policy, 81: 61-66.

Lovell, C.K., (1993). Production frontier and productive efficiency. In: Fried, H.O., Lovell, C.K., Schmidt, S.S. (Eds.), The Measurement of Productive Efficiency. Techniques and Applications. Oxford University Press, Oxford, pp. 3–67.

Mahlberg, Bernhard, Mikulas Luptacik and Biresh K. Sahoo (2011). Examining the drivers of total factor productivity change with an illustrative example of 14 EU countries, Ecological Economics, 72: 60-69.

Mastromarco, C., Simar, L. (2014). Effect of FDI and time on catching-up: new insights from a conditional nonparametric frontier analysis, Journal of Applied Econometrics, 30(5): 826-847.

Seiford, L.M., (1996). Data envelopment analysis: the evolution of the state-of-the-art (1978–1995). Journal of Productivity Analysis, 7(2/3): 99–138.

Seiford, L.M., (1997). A bibliography for data envelopment analysis (1978–1996). Annals of Operation Research, 73: 393–438.

Simar, L. and P. W. Wilson (1998). Sensitivity Analysis of Efficiency Scores: How to Bootstrap in Nonparametric Frontier Models. Management Science, 44: 49–61.

Simar, L. and Wilson, P.W. (2000a) A general methodology for bootstrapping in nonparametric frontier models, Journal of Applied Statistics, 27(6): 779–802.

Simar, L. and Wilson, P.W. (2000b) Statistical inference in nonparametric frontier models: the state of the art, Journal of Productivity Analysis, 13(1): 49–78.

Simar, L. and P. W. Wilson (2002). Non-Parametric Tests of Returns to Scale. European Journal of Operational Research, 139: 115–132.

Simar, L. (2003). Detecting outliers in frontier models: a simple approach, Journal of Productivity Analysis, 20: 391–424.

Taskin F, Zaim O. (2001) The role of international trade on environmental efficiency: a DEA approach. Economic Modelling, 18:1-17.

Wilson, P. W. (1993), Detecting outliers in deterministic nonparametric frontier models with multiple outputs, Journal of Business and Economic Statistics, 11: 319–323.

Wilson, P. W. (1995), Detecting influential observations in data envelopment analysis, Journal of Productivity Analysis, 6: 27–45.

Zaim O, Taskin F. (2000) A Kuznets curve in environmental efficiency: an application on OECD countries. Environmental and Resource Economics, 17: 21–36.

Zaim O. (2004) Measuring environmental performance of state manufacturing through changes in pollution intensities: a DEA framework. Ecological Economics, 48: 37–47.

Zofio JL, Prieto AM (2001) Environmental efficiency and regulatory standards: the case of CO2 emissions from OECD industries. Resource and Energy Economics, 23: 63–83.