investment and dynamic eco-efficiency - oecd.org - oecd 5b1 alfons oude lansink ppt.pdf ·...
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Investment and Dynamic Eco-Efficiency
By-production of undesirable output
Alfons Oude Lansink, Wageningen University, Netherlands
Hervé Dakpo – INRA, France
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Background (1)
Investments in capital come with adjustment costs
Adjustment costs: learning, installation and administrative costs, reorganisation.
Adjustment costs increase with the level of investments
Adjustment costs in quasi-fixed inputs (like capital) prevent from instantaneous adjustment
Technical and eco-efficiency are not correctly measured if adjustment costs are not accounted for
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I 0
x z(x,I) •
gx
gI
Z’=(x-ßgx, I+ßgI)
ß=Dynamic Technical Inefficiency
Background (1)
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Background (2)
Different approaches in the literature towards measuring eco-efficiency
Some authors introduced a dynamics into the model
● Skevas et al (2014) developed a dynamic DEA model in which negative externalities affect the future production conditions
● Kuosmanen and Kuosmanen incorporated the nutrient accumulation in a materials balance approach
So far, adjustment costs in investments have not been explicitly accounted for in eco-efficiency measurements
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Objectives
Extend the by-production model to account for adjustment costs
Measure dynamic eco-efficiency for a sample of French livestock farms – results are compared with the static approach
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Production Technologies
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Production Technologies
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We follow Dakpo (2015) and adapt the dependence constraints to link the two sub-
technologies:
Eco-efficiency is computed using a Russel type directional distance function :
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Data French Livestock Farms (1978-2013)
Good Output (meat production)
Bad Output (CO2 equivalents, computed using LCA)
Variable inputs
● Operational costs
● Herd
Quasi-fixed input (Capital invested in machinery, buildings, land improvement)
Fixed inputs
● Land
● labor
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Dynamic Inefficiency
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1978-1989 1990-2001 2002-2013
Intermediate 0.080 0.063 0.088
Herd size 0.031 0.024 0.018
Investments 4.605 4.407 3.101
Meat 0.027 0.018 0.026
GHG emissions 0.066 0.054 0.066
Table 1: Dynamic Inefficiencies per period and variable
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Static Inefficiency
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Table 2: Static Inefficiencies per period and variable
1978-1989 1990-2001 2002-2013
Intermediate 0.179 0.161 0.156
Herd size 0.080 0.114 0.107
Capital 0.467 0.376 0.396
Meat 0.014 0.009 0.015
GHG emissions 0.156 0.186 0.178
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Static versus Dynamic
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Dynamic Static
Intermediate 0.076 0.165
Herd size 0.024 0.100
Investments/Capital 4.061 0.413
Meat 0.023 0.013
GHG emissions 0.062 0.173
Table 3: Dynamic and Static Inefficiencies
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Conclusions
Developed a model that accounts for adjustment costs in by-production models
Static inefficiency in inputs tends to be bigger than dynamic inefficiency
Large inefficiency in the investments
Next step: Use this approach to measure dynamic environment adjusted total factor productivity growth
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Thank you!
Alfons Oude Lansink
Hervé Dakpo
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