José Luis Zofío

Environmental efficiency and regulatory standards: the case of CO2 emissions from OECD industries

Abstract It is generally accepted that production processes should take into account environmental sustainability principles. Hence, any attempt to measure the performance of these processes should highlight, as a reference standard, those processes that combine greater amounts of desirable production with lower levels of undesirable outputs, e.g. waste generation or emissions of greenhouse gases. Using this concept of environmental performance, it is possible to establish efficiency scores within a Data Envelopment Analysis (DEA) framework, and to calculate desirable output losses when specific environmental standards on undesirable production are set by the authority, i.e. legislative opportunity costs. This can be achieved by solving programming models that call for a reduction of undesirable outputs and that stress the weak disposability of such outputs. Once a standard is set, it congests or binds the technology if the reductions in undesirable production required to meet it imply lower desirable output levels, i.e. the regulation is costly. DEA enables us to simulate, for each producer, the effect of any regulatory standard on production, and the limits beyond which production is impossible — lower limits, or superfluous — upper limits, because the chosen standard does not bind production. The empirical implications of the DEA process are analyzed considering different regulatory scenarios on CO2 emissions for the Organization for Economic Cooperation and Development (OECD)s manufacturing industries.

Evaluating Effectiveness in Public Provision of Infrastructure and Equipment: The Case of Spanish Municipalities

Concernabout local government ability to provide public services inan effective way is increasing in Spain as these functions arebeing decentralized from the central to regional governments.The goal of this research is to provide state and local officialswith a decision making tool that allows evaluation of the quantityand quality of the public services--infrastructure and equipment--thatthey are responsible for offering. We characterize performanceamong similar administrative observations, e.g. municipalities,by defining effectiveness improvement strategies--basedon selective funds allocation--that identify and rank thosesectors and variables that present provision deficits and requireprior attention. In order to evaluate provision at the municipalitylevel we define an additive effectiveness measure making useof Data Envelopment Analysis techniques which are enhanced toaccount for the presence of standards. The statistical data arefrom the Spanish Local Infrastructure and Equipment Survey.

Network DEA efficiency in input-output models : With an application to OECD countries

We undertake network efficiency analysis within an input–output model that allows us to assess potential technical efficiency gains by comparing technologies corresponding to different economies. Input–output tables represent a network where different sectoral nodes use primary inputs (endowments) to produce intermediate input and outputs (according to sectoral technologies), and satisfy final demand (preferences). Within the input–output framework it is possible to optimize primary inputs allocation, intermediate production and final demand production by way of non-parametric data envelopment analysis (DEA) techniques. DEA allows us to model the different subtechnologies corresponding to alternative production processes, to assess efficient resource allocation among them, and to determine potential output gains if inefficiencies were dealt with. The proposed model optimizes the underlying multi-stage technologies that the input–output system comprises identifying the best practice economies. The model is applied to a set of OECD countries.

Malmquist productivity index decompositions: a unifying framework

In two widely cited but unpublished working papers, Simar and Wilson (1998) and Zofío and Lovell (1998) proposed an alternative decomposition of the Malmquist Productivity Index, which retained what seemed to be the strongholds of previous proposals with regard to the contribution of technological and efficiency change to productivity change. Namely, a technical change term with regard to the best practice variable returns to scale (VRS) technology, which is to be found in Ray and Desli (1997) and a scale efficiency change term that illustrates a firms situation with regard to optimal scale (benchmark technology), Färe et al . (1994). Attaining this objective required the introduction of an additional term in the Malmquist Productivity Index decomposition, which would reflect the scale bias of technical change. It is our objective to provide economic rationale for this term within a theory of production context, the existing decompositions and recent articles that further elaborate on this issue. The ideas are illustrated using productivity trends in 17 OECD countries. 1 This article has benefited from conversations with C. A. Knox Lovell, Leopold Simar and Paul Wilson. The author is the sole responsible for any errors in the text.

On the inconsistency of the Malmquist–Luenberger index

Apart from the well-known weaknesses of the standard Malmquist productivity index related to infeasibility and not accounting for slacks, already addressed in the literature, we identify a new and significant drawback of the Malmquist–Luenberger index decomposition that questions its validity as an empirical tool for environmental productivity measurement associated with the production of bad outputs. In particular, we show that the usual interpretation of the technical change component in terms of production frontier shifts can be inconsistent with its numerical value, thereby resulting in an erroneous interpretation of this component that passes on to the index itself. We illustrate this issue with a simple numerical example. Finally, we propose a solution for this inconsistency issue based on incorporating a new postulate for the technology related to the production of bad outputs.

Graph efficiency and productivity measures: an application to US agriculture

Hyperbolic measures of efficiency and productivity change with respect to a graph representation of production technology allow researchers to consider output and input dimensions simultaneously in measuring producer performance. Hyperbolic efficiency measures have been proposed, but empirical implementation has not followed, either in efficiency analysis or in productivity analysis. The objectives of this paper are to define hyperbolic performance measures on a graph representation of production technology, to motivate their use by stating some of their advantages over their radial counterparts, and to introduce a direct formulation to calculate them making use of Data Envelopment Analysis techniques. The ideas are illustrated by calculating hyperbolic efficiency and Malmquist productivity indexes for a US agricultural panel data set.

The economic dimension of the culture and leisure industry in Spain: national, sectoral and regional analysis.

This article analyses the economic dimension of a set of activities groupedunder the heading, Culture and Leisure Industry, from three complementaryperspectives: national (Spain), sectoral and regional. Particular emphasis isplaced on determining the value added generated by this industry and itscontribution to the Gross Domestic Product – 4.5% – as wellas showing its level of employment both in absolute terms and as a percentageof the number of employees in the economy – 7.8%. This is apioneer project; studies in this field on either a national or internationalscale are scarce. The study demonstrates that the cultural sector is aproductive activity generating wealth in Spain. However, a high degree ofheterogeneity is found at both the sectoral and regional levels. Economicactivity is led by Performing, Musical and Audiovisual Arts (mainlyTelevision) and Publishing and Printing, which jointly account for about70% of sales and gross value added, and it is concentrated in similarproportions in developed regions specialized in service industries, Madrid andCatalonia, where most culture and leisure activities are available.

Integrating Network Analysis with the Production Function Approach to Study the Spillover Effects of Transport Infrastructure

Álvarez-Ayuso I. C., Condeço-Melhorado A. M., Gutiérrez J. and Zofío J. L. Integrating network analysis with the production function approach to study the spillover effects of transport infrastructure, Regional Studies. The production function approach is used to analyse the role of transport infrastructure on regional gross domestic product (GDP) using new definitions and measures of road network capital stock that represent the real benefit obtained by regions when accessing markets. Improving the existing methodologies, the infrastructure stock is weighted with trade data so as to estimate the direct effects on production of a regions own infrastructure (what is termed here ‘internal stock’), as well as the spillover effects that it receives from using that of neighbouring regions (imported stock). The methodology is illustrated by using Spanish data for the 1980–2007 period and these internal and imported infrastructure stocks are calculated using geographical information system (GIS) network analysis based on generalized transportations costs. With this new data set, successive regressions are performed controlling for endogeneity and the obtained results are compared with those of previous research. The validity of this methodology and the existence of significant and rather large spillover effects that even outweigh the effect of the internally endowed capital stock on aggregate production are confirmed. On average, the relative magnitude of the spillover effects to that of the internal (own) stock effect increases with the level of territorial disaggregation, i.e., it is larger for provincial data than for regional data. Unfortunately, it is also found that spillover effects are asymmetric, exhibiting negative values for poorer regions, as they do not profit from the capital stock existing in their neighbouring areas as do their richer counterparts, thereby casting doubts on the cohesion effects attributed to transport infrastructure investments.

How to properly decompose economic efficiency using technical and allocative criteria with non-homothetic DEA technologies

We discuss how to properly decompose economic efficiency when the underlying technology is non-homothetic using alternative allocative and technical efficiency criteria. We first show that only under the production of one output and assuming the particular case of constant returns to scale homotheticity, we may claim that the standard radial models correctly measure pure technical efficiency. Otherwise, when non-homotheticity is assumed, we then show that these traditional estimations would measure an undetermined mix of technical and allocative efficiency. To restore a consistent measure of technical efficiency in the non-homothetic case we introduce a new methodology that takes as reference for the economic efficiency decomposition the preservation of the allocative efficiency of firms producing in the interior of the technology. This builds upon the so-called reversed approach recently introduced by Bogetoft et al. (2006) that allows estimating allocative efficiency without presuming that technical efficiency has been already accomplished. We illustrate our methodology within the Data Envelopment Analysis framework adopting the most simple non-homothetic BCC model and a numerical application. In this application we show that there are significant differences in the allocative and technical efficiency scores depending on the approach.

Who leads research productivity growth? Guidelines for R&D policy-makers

This paper evaluates to what extent policy-makers have been able to promote the creation and consolidation of comprehensive research groups that contribute to the implementation of a successful innovation system. Malmquist productivity indices are applied in the case of the Spanish Food Technology Program, finding that a large size and a comprehensive multi-dimensional research output are the key features of the leading groups exhibiting high efficiency and productivity levels. While identifying these groups as benchmarks, we conclude that the financial grants allocated by the program, typically aimed at small-sized and partially oriented research groups, have not succeeded in reorienting them in time so as to overcome their limitations. We suggest that this methodology offers relevant conclusions to policy evaluation methods, helping policy-makers to readapt and reorient policies and their associated means, most notably resource allocation (financial schemes), to better respond to the actual needs of research groups in their search for excellence (micro-level perspective), and to adapt future policy design to the achievement of medium-long term policy objectives (meso and macro-level).