Hostname: page-component-cd9895bd7-gxg78 Total loading time: 0 Render date: 2024-12-27T08:30:05.121Z Has data issue: false hasContentIssue false
  • English
  • Français

A frontier functions approach to optimal scales of sustainable production

Published online by Cambridge University Press:  13 February 2014

Viet-Ngu Hoang
Viet-Ngu Hoang*
Affiliation:
Queensland University of Technology, Business School, Room Z829, Block Z, Gardens Point Campus, Brisbane, Australia; and the TERRECO-IRTG program. Phone: +61 7 313 84325. Fax: +61 7 3138 1500. E-mail: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper translates the concepts of sustainable production to three dimensions of economic, environmental and ecological sustainability to analyze optimal production scales by solving optimizing problems. Economic optimization seeks input-output combinations to maximize profits. Environmental optimization searches for input-output combinations that minimize the polluting effects of materials balance on the surrounding environment. Ecological optimization looks for input-output combinations that minimize the cumulative destruction of the entire ecosystem. Using an aggregate space, the framework illustrates that these optimal scales are often not identical because markets fail to account for all negative externalities. Profit-maximizing firms normally operate at the scales which are larger than optimal scales from the viewpoints of environmental and ecological sustainability; hence policy interventions are favoured. The framework offers a useful tool for efficiency studies and policy implication analysis. The paper provides an empirical investigation using a data set of rice farms in South Korea.

Type
Research Article
Information
Environment and Development Economics , Volume 19 , Issue 5 , October 2014 , pp. 566 - 584
Copyright
Copyright © Cambridge University Press 2014 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Ayres, R.U. (1995), ‘Thermodynamics and process analysis for future economic scenarios’, Environmental and Resource Economics 6(3): 207–230.Google Scholar
Banker, R.D., Cooper, W.W., Seiford, L.M., Thrall, R.M., and Zhu, J. (2004), ‘Returns to scale in different DEA models’, European Journal of Operational Research 154(1): 345–362.Google Scholar
Bhat, M.G., English, B.C., Turhollow, A.F., and Nyangito, H. (1994), Energy in Synthetic Agricultural Inputs: Revisited, Oak Ridge, TN: Oak Ridge National Laboratory.Google Scholar
Brundtland, G.H. (1987), ‘Report of the World Commission on Environment and Development: Our Common Future’, United Nations World Commission on Environment and Development (WCED), Oxford: Oxford University Press.Google Scholar
Coelli, T., Lauwers, L., and Van Huylenbroeck, G. (2007), ‘Environmental efficiency measurement and the materials balance condition’, Journal of Productivity Analysis 28(1): 3–12.Google Scholar
Dincer, I. and Rosen, M.A. (2007), ‘Energetic, exergetic, environmental and sustainability aspects of thermal energy storage systems’, in Paksoy, H.Ö. (ed.), Thermal Energy Storage for Sustainable Energy Consumption, Dordrecht: Springer, pp. 23–46.Google Scholar
FAO (1972), ‘Food composition table for use in East Asia’, Rome: Food and Agriculture Organisation, Food Policy and Nutrition Division.Google Scholar
Färe, R. and Grosskopf, S. (2000), ‘Theory and application of directional distance functions’, Journal of Productivity Analysis 13(1): 93–103.Google Scholar
Färe, R., Grosskopf, S., and Pasurka, J.C.A. (2007), ‘Environmental production functions and environmental directional distance functions’, Energy 32(7): 1055–1066.Google Scholar
Glavic, P. and Lukman, R. (2007), ‘Review of sustainability terms and their definitions’, Journal of Cleaner Production 15(18): 1875–1885.CrossRefGoogle Scholar
Green, M.B. (1987), ‘Energy in pesticide manufacture, distribution and use’, in Helsel, Z.R.(ed.), Energy in Plant Nutrition and Pest Control, Amsterdam: Elsevier, pp. 165–177.Google Scholar
Hansen, J.W. (1996), ‘Is agricultural sustainability a useful concept?’, Agricultural Systems 50(1): 117–143.Google Scholar
Hatirli, S.A., Ozkan, B., and Fert, C. (2006), ‘Energy inputs and crop yield relationship in greenhouse tomato production’, Renewable Energy 31(4): 427–438.Google Scholar
Hoang, V.-N. and Alauddin, M. (2011), ‘Analysis of agricultural sustainability: a review of exergy methodologies and their application in OECD’, International Journal of Energy Research 35(6): 459–476.Google Scholar
Hoang, V.-N. and Alauddin, M. (2012), ‘Input-orientated data envelopment analysis framework of measuring and decomposing economic, environmental and ecological efficiency: an application to OECD agriculture’, Environmental and Resource Economics 51(3): 431–452.Google Scholar
Hoang, V.-N. and Coelli, T. (2011), ‘Measurement of agricultural total factor productivity growth incorporating environmental factors: a nutrients balance approach’, Journal of Environmental Economics and Management 62(3): 462–474.Google Scholar
Hoang, V.-N. and Nguyen, T.T. (2013), ‘Analysis of environmental efficiency variation: a materials balance approach’, Ecological Economics 86: 37–46.Google Scholar
Hoang, V.-N. and Rao, D.S.P. (2010), ‘Measuring and decomposing sustainable efficiency in agricultural production: a cumulative exergy balance approach’, Ecological Economics 69(9): 1765–1776.Google Scholar
Khodabakhshi, M. (2009), ‘Estimating most productive scale size with stochastic data in data envelopment analysis’, Economic Modelling 26(5): 968–973.CrossRefGoogle Scholar
Kim, B., Park, J.-H., Hwang, G., and Choi, K. (1997), ‘Eutrophication of large freshwater ecosystems in Korea’, Korean Journal of Limnology 30(Suppl.): 512–517.Google Scholar
Kumbhakar, S.C. and Lovell, C.A.K. (2000), Stochastic Frontier Analysis, Cambridge: Cambridge University Press.Google Scholar
Lauwers, L. (2009), ‘Justifying the incorporation of the materials balance principle into frontier-based eco-efficiency models’, Ecological Economics 68(6): 1605–1614.Google Scholar
NEAD (2009), ‘The National Environmental Accounting Database (Nead)’, University of Florida, Gainesville, FL.Google Scholar
Nguyen, T.T., Hoang, V.-N., and Seo, B. (2012), ‘Cost and environmental efficiency of rice farms in South Korea’, Agricultural Economics 43(4): 367–376.Google Scholar
O'Donnell, C.J. (2010), ‘Measuring and decomposing agricultural productivity and profitability change’, Australian Journal of Agricultural and Resource Economics 54(4): 527–560.Google Scholar
Picazo-Tadeo, A.J., Gómez-Limón, J.A., and Reig-Martínez, E. (2011), ‘Assessing farming eco-efficiency: a data envelopment analysis approach’, Journal of Environmental Management 92(4): 1154–1164.Google Scholar
Reinhard, S. and Thijssen, G. (2000), ‘Nitrogen efficiency of Dutch dairy farms: a shadow cost system approach’, European Review of Agricultural Economics 27(1): 167–186.Google Scholar
Rosen, M.A. (2002), ‘Exergy and economics: is exergy profitable?’, Exergy, An International Journal 2(4): 218–220.Google Scholar
Sciubba, E. (2001), ‘Beyond thermoeconomics? The concept of extended exergy accounting and its application to the analysis and design of thermal systems’, Exergy, An International Journal 1(1): 68–84.Google Scholar
Sciubba, E. (2003), ‘Extended exergy accounting applied to energy recovery from waste: the concept of total recycling’, Energy 28(13): 1315–1334.Google Scholar
Simar, L. and Wilson, P.W. (1998), ‘Sensitivity analysis of efficiency scores: how to bootstrap in nonparametric frontier models’, Management Science 44(1): 49–61.Google Scholar
Szargut, J., Morris, D.R., and Steward, F.R. (1988), Exergy Analysis of Thermal Chemical and Metallurgical Processes, New York: Hemisphere.Google Scholar
Tortosa-Ausina, E. (2002), ‘Exploring efficiency differences over time in the Spanish banking industry’, European Journal of Operational Research 139(3): 643–664.Google Scholar
Tortosa-Ausina, E. (2003), ‘Nontraditional activities and bank efficiency revisited: a distributional analysis for Spanish financial institutions’, Journal of Economics and Business 55(4): 371–395.Google Scholar
Van Meensel, J., Lauwers, L., Van Huylenbroeck, G., and Van Passel, S. (2010), ‘Comparing frontier methods for economic-environmental trade-off analysis’, European Journal of Operational Research 207(1): 1027–1040.Google Scholar
Wall, G. (1977), ‘Exergy – a useful concept within resource accounting’, Report No. 77-42, Institute of Theoretical Physics, Goteborg.Google Scholar
Welch, E. and Barnum, D. (2009), ‘Joint environmental and cost efficiency analysis of electricity generation’, Ecological Economics 68(8–9): 2336–2343.CrossRefGoogle Scholar
Supplementary material: PDF

Hoang Supplementary Material

Appendix

Download Hoang Supplementary Material(PDF)
PDF 94 KB