Munich Personal RePEc Archive

Productive inefficiency analysis and toxic chemical substances in US and Japanese manufacturing sectors

Fujii, Hidemichi and Managi, Shunsuke (2012): Productive inefficiency analysis and toxic chemical substances in US and Japanese manufacturing sectors. Published in: Asian Business & Management

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Corporate social responsibility is imperative for manufacturing companies to achieve sustainable development. Under a strong environmental information disclosure system, polluting companies are disadvantaged in terms of market competitiveness because they lack an environmentally friendly image. The objective of this study is to analyze the productive inefficiency change in relation to toxic chemical substance emissions for the US and Japan and their corresponding policies. We apply the weighted Russell directional distance model to measure companies’ productive inefficiency which represents their production technology. The data encompass 330 US manufacturing firms observed from 1999 to 2007, and 466 Japanese manufacturing firms observed from 2001 to 2008. This paper focuses on nine high-pollution industries (rubber and plastics; chemicals and allied products; paper and pulp; steel and nonferrous metal; fabricated metal; industrial machinery; electrical products; transportation equipment; precision instruments) categorized into two industry groups: basic materials industries and processing and assembly industries. The results show that the productive inefficiency decreased in all industrial sectors in the US and Japan from 2001 to 2007. In particular, that of the electrical products industry decreased rapidly after 2002 for both countries, possibly because of the enforcement of strict environmental regulations for electrical products exported to European markets.

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