Non‐parametric Productivity Analysis with Undesirable Outputs: An Application to the Canadian Pulp and Paper Industry

TLDR

The study extends the Chavas‑Cox non‑parametric analysis by incorporating undesirable outputs to better represent production technology. The authors construct inner and outer technology bounds and apply the method to Canadian pulp and paper industry time‑series data. Ignoring pollutant output changes underestimates productivity growth, and the wide gap between inner and outer bound estimates highlights the limitations of DEA‑only approaches.

Abstract

Abstract This article extends the Chavas‐Cox approach to non‐parametric analysis by incorporating undesirable outputs to provide a more complete representation of the production technology. Inner and outer non‐parametric technology bounds are constructed. The methods are illustrated with application to time series data for the Canadian pulp and paper industry. Conventional measures that ignore changes in pollutant outputs underestimate true productivity growth. Further, there is a large gap between estimates generated with reference to inner and outer bounds to the technology, suggesting that researchers need to be aware of the limitations of results derived from analyses relying only on DEA methods.