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Impact of bad outputs and environmental regulation on efficiency of Indian leather firms: a directional distance function approach

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  • Aparajita Singh
  • Haripriya Gundimeda

Abstract

This paper measures the environmental efficiency of the grossly polluting Indian leather industry which faces stringent environmental regulations. The environmental efficiency measure accounts for associated bad outputs (total suspended solids and chromium) with the good output (leather products) of firms and hence, provides an important benchmark for improving environmental performance. Drawing data from fieldwork in the Kanpur industry of India, the study estimates efficiency using the directional distance function approach under three directional vectors. The results reveal that the efficiency of firms is underestimated when bad outputs are omitted in the production technology. There is significant potential to increase leather production and reduce pollutants across firms. The study confirms that regulation improves the environmental efficiency of leather firms. However, regulation imposes an opportunity cost on firms of an average 3% loss in expanding leather output and reducing inputs. The study recommends mandating the use of cleaner technology and market-based instruments to improve environmental efficiency.

Suggested Citation

  • Aparajita Singh & Haripriya Gundimeda, 2021. "Impact of bad outputs and environmental regulation on efficiency of Indian leather firms: a directional distance function approach," Journal of Environmental Planning and Management, Taylor & Francis Journals, vol. 64(8), pages 1331-1351, June.
    • Handle: RePEc:taf:jenpmg:v:64:y:2021:i:8:p:1331-1351
    DOI: 10.1080/09640568.2020.1822307
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    Cited by:

    1. Koppiahraj Karuppiah & Bathrinath Sankaranarayanan & Syed Mithun Ali, 2023. "Towards Sustainability: Mapping Interrelationships among Barriers to Circular Bio-Economy in the Indian Leather Industry," Sustainability, MDPI, vol. 15(6), pages 1-26, March.
    2. Imane Bounadi & Khalil Allali & Aziz Fadlaoui & Mohammed Dehhaoui, 2023. "Water Pollution Abatement in Olive Oil Industry in Morocco: Cost Estimates and Policy Implications," Sustainability, MDPI, vol. 15(5), pages 1-19, February.

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