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Multilateral Productivity Comparisons When Some Outputs are Undesirable: A Nonparametric Approach

Rolf Faere, Shawna Grosskopf, C. A. K. Lovell and Carl Pasurka
The Review of Economics and Statistics
Vol. 71, No. 1 (Feb., 1989), pp. 90-98
Published by: The MIT Press
DOI: 10.2307/1928055
Stable URL: http://www.jstor.org/stable/1928055
Page Count: 9
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Abstract

Multilateral productivity comparisons of firms producing multiple outputs, some of which are undesirable, are obtained by making two modifications to the standard Farrell approach to efficiency measurement. The restriction that production technology satisfy strong disposability of outputs is relaxed to allow for the fact that undesirable outputs may be freely disposable, and the efficiency measures are modified to allow for an asymmetric treatment of desirable and undesirable outputs. Performance measures that satisfy these requirements are calculated as solutions to programming problems. The methodology is applied to a sample of mills producing paper and pollutants.

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