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Direct estimation of marginal characteristics of nonparametric production frontiers in the presence of undesirable outputs

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journal contribution
posted on 23.05.2019, 10:47 authored by Victor PodinovskiVictor Podinovski
There is extensive literature on the estimation of marginal characteristics of nonparametric production frontiers, including various marginal rates and elasticity measures. It has recently been shown that all such characteristics can be evaluated by a unifying linear programming approach applicable to any polyhedral production technology. In this paper we show how this approach can be applied to polyhedral technologies incorporating undesirable outputs. In particular, we derive a linear programming method for the direct assessment of the marginal rate of transformation between a bad and a good output often used for the estimation of the unobserved price of the bad output. In contrast with the existing methods based on a conventionally specified directional distance function, the new approach does not require the assessment of two shadow prices of the good and bad outputs. It also correctly estimates one-sided marginal rates in all cases in which the shadow prices on nonsmooth production frontiers are not unique.

History

School

  • Business and Economics

Department

  • Business

Published in

European Journal of Operational Research

Volume

279

Issue

1

Pages

258-276

Citation

PODINOVSKI, V.V., 2019. Direct estimation of marginal characteristics of nonparametric production frontiers in the presence of undesirable outputs. European Journal of Operational Research, 279 (1), pp.258-276.

Publisher

© Elsevier

Version

AM (Accepted Manuscript)

Publisher statement

This paper was accepted for publication in the journal European Journal of Operational Research and the definitive published version is available at https://doi.org/10.1016/j.ejor.2019.05.024

Acceptance date

16/05/2019

Publication date

2019-05-22

Copyright date

2019

ISSN

0377-2217

Language

en