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Modeling emission-generating technologies: reconciliation of axiomatic and by-production approaches

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  • Sushama Murty

    (University of Exeter
    Jawaharlal Nehru University)

  • R. Robert Russell

    (University of California, Riverside)

Abstract

We study the link between two recent approaches to modeling emission-generating technologies: the by-production approach and the axiomatic approach. The by-production approach models these technologies as intersections of two independent sub-technologies reflecting (1) the relations between goods in intended-output production designed by human engineers and (2) the emission-generating mechanism of nature governed by material-balance considerations. The axiomatic approach proposes a set of axioms that a pollution-generating technology should satisfy. We show that the by-production technology satisfies these axioms and that, conversely, any technology satisfying the axioms can be decomposed into two sub-technologies satisfying the by-production properties. In either approach, the technology can be functionally represented by two radial distance functions with well-defined properties. These distance functions can also serve as measures of technological and environmental efficiency. We exploit the link between the by-production and axiomatic approaches to offer preliminary suggestions about suitable functional forms for the empirical estimation of the two distance functions.

Suggested Citation

  • Sushama Murty & R. Robert Russell, 2018. "Modeling emission-generating technologies: reconciliation of axiomatic and by-production approaches," Empirical Economics, Springer, vol. 54(1), pages 7-30, February.
    • Handle: RePEc:spr:empeco:v:54:y:2018:i:1:d:10.1007_s00181-016-1183-4
    DOI: 10.1007/s00181-016-1183-4
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    1. Murty, Sushama, 2010. "Externalities and fundamental nonconvexities: A reconciliation of approaches to general equilibrium externality modeling and implications for decentralization," Journal of Economic Theory, Elsevier, vol. 145(1), pages 331-353, January.
    2. Murty, Sushama & Russell, R. Robert, 2010. "On modeling pollution-generating technologies," The Warwick Economics Research Paper Series (TWERPS) 931, University of Warwick, Department of Economics.
    3. Serra, Teresa & Chambers, Robert G. & Oude Lansink, Alfons, 2014. "Measuring technical and environmental efficiency in a state-contingent technology," European Journal of Operational Research, Elsevier, vol. 236(2), pages 706-717.
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    5. Forsund, Finn R., 2009. "Good Modelling of Bad Outputs: Pollution and Multiple-Output Production," International Review of Environmental and Resource Economics, now publishers, vol. 3(1), pages 1-38, August.
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    8. Pethig, Rudiger, 2006. "Non-linear production, abatement, pollution and materials balance reconsidered," Journal of Environmental Economics and Management, Elsevier, vol. 51(2), pages 185-204, March.
    9. Sushama Murty, 2015. "On the properties of an emission-generating technology and its parametric representation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 60(2), pages 243-282, October.
    10. Kumbhakar, Subal C. & Tsionas, Efthymios G., 2016. "The good, the bad and the technology: Endogeneity in environmental production models," Journal of Econometrics, Elsevier, vol. 190(2), pages 315-327.
    11. Sushama Murty, 2015. "Marginal reforms to facilitate climate change mitigation: An assessment of costs and abilities to abate of different countries," Discussion Papers 1508, University of Exeter, Department of Economics.
    12. Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521322249, September.
    13. Murty, Sushama & Robert Russell, R. & Levkoff, Steven B., 2012. "On modeling pollution-generating technologies," Journal of Environmental Economics and Management, Elsevier, vol. 64(1), pages 117-135.
    14. Moslener, Ulf & Requate, Till, 2007. "Optimal abatement in dynamic multi-pollutant problems when pollutants can be complements or substitutes," Journal of Economic Dynamics and Control, Elsevier, vol. 31(7), pages 2293-2316, July.
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    More about this item

    Keywords

    Emission-generating technologies; By-production technologies; Free input and output disposability; Costly disposability; Distance function;
    All these keywords.

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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