On the measurement of productivity and environmental efficiency in the presence of the joint production of goods and bads : an application to OECD countries

Productivity measures, which do not account for environmental performance, are biased. When it comes to incorporating the developments in environmental performance into the measurement of productivity, the traditional “Tornquist type” indices fail to measure the productivity particularly in the cases where price information on undesirable outputs do not exist. Therefore, there is a need for an alternative measure which puts due emphasis on production with negative externalities without requiring price information. Motivated by these facts, this study first employs a Malmquist index for OECD countries without considering the existence of pollutant data and then to overcome the shortfall of this index, a Malmquist-Luenberger productivity index is employed. Furthermore, using an index number approach, environmental performance of OECD countries is also evaluated, by using a method, which relies on the computation of the distance functions within a DEA framework.