Energy Prices and Induced Technological Progress

This study measures energy price induced technological change using directional distance function for a panel data of 55 countries over the period 1974 to 2000. The parameter estimates of directional distance function reveal the absence of neutral exogenous innovations and the presence of biased innovations either it is exogenous or energy price induced. We observe larger energy price induced technological change effects in developed countries in comparison to developing countries in the periods after first (1974), and second (1980) world oil crisis that caused substantial energy price increases. These findings concur with data that show most R&D occurs in high-income countries, particularly the US and Japan.

Decomposition of total factor productivity growth: A regional analysis of Indian industrial manufacturing growth.

Total factor productivity (TFP) growth in industrial manufacturing is measured for 15 major Indian states for the period 1982-83 to 2000-01 using non-parametric linear programming methods. TFP growth is decomposed into efficiency and technological changes and also measure for the bias in technical change. The resulting information is used to examine whether the post-reform period shows any improvement in productivity and efficiency in comparison to the pre-reform one. Findings of the present exercise indicate the improvement in TFP. The recent change in TFP is governed by the technical progress in contrast to similar gain caused by the improvement in technical efficiency in the pre-reform regime. The technological progress in state manufacturing exhibited a capital using bias during the study period. Regional differences in TFP persist, although the magnitude of variation has declined in the post-reform period. Moreover, it is also found that there is a tendency of convergence in terms of TFP growth rate among Indian states during the post-reform years and only the states that were technically efficient at the beginning of the reform remain innovative.Industry ; Industrial manufacturing ; Growth ; Total factor productivity

Energy Prices and Induced Technological Progress

This study measures energy price induced technological change using directional distance function for a panel data of 55 countries over the period 1974 to 2000. The parameter estimates of directional distance function reveal the absence of neutral exogenous innovations and the presence of biased innovations either it is exogenous or energy price induced. We observe larger energy price induced technological change effects in developed countries in comparison to developing countries in the periods after first (1974), and second (1980) world oil crisis that caused substantial energy price increases. These findings concur with data that show most R&D occurs in high-income countries, particularly the US and Japan.

Analysing industrial water demand in India: An input distance function approach.

This study investigates the water demand of Indian manufacturing plants. It adopts an input distance function approach and approximates it by a translog form. Duality between cost function and input distance function is exploited to retrieve information concerning substitutability and the shadow price of water. The model is estimated, using linear programming approach, on a sample of 92 firms over the three years. The results show that the average shadow price of water is rupees 7.21 per kilolitre and the price elasticity of derived demand for water is high, -1.11 on average, a value similar to what has been found by other researchers working on developing countries (for example, China and Brazil). This indicates that water charges may be an effective instrument for water conservation.Input distance function ; Industrial water demand ; Translog form water ; Price elasticity

The Macroeconomic Effects of Oil Price Shocks: Empirical Evidence for India

This study assesses the oil prices-macaroeconomy relationship by means of multivariate VAR using both linear and non-linear specifications. Scaled oil prices model outperforms other models used in the study. It studies the impacts of oil price shocks on the growth of industrial production for Indian economy over the period 1975Q1-2004Q3. It is found that oil prices Granger cause macroeconomic activities. Evidence of asymmetric impact of oil price shocks on industrial growth is found. Oil price shocks negatively affect the growth of industrial production and we find that an hundred percent increase in oil prices lowers the growth of industrial production by one percent. Moreover, the variance decomposition analysis while putting the study in perspective finds that the oil price shocks combined with the monetary shocks are the largest source of variation in industrial production growth other than the variable itself.

Productivity and profitability changes in the U.S. electric power plants during SO2 trading regime.

We examine the productivity and profitability changes in the US electric generating plants during the SO2 trading regime. Input distance function is used to compute the cumulative Malmquist productivity and Fisher productivity indexes. By exploiting the duality between cost and input distance functions, we obtain a measure of profitability, as an approximation for the Fisher productivity index. We measure productivity and profitability changes when SO2 emissions are ignored in the production technology and when these emissions appear as bad output. We find that the productivity is higher when the bad outputs are modeled as weakly disposable in comparison to the situation when they are modeled as freely disposable. But we do not find any significant difference in profitability under these alternative methods of modeling of production technology concerning the disposability of bad outputs.Electricity generating plants ; Productivity ; Profitability ; SO2 ; Allowance program

Is India on a Sustainable Development Path?

Sustainability requires that the productive base measured in terms of comprehensive wealth of a society should be increasing on per capita basis. Comprehensive wealth includes manufactured, human and natural capital along with knowledge base and institutions. This study offers methodological improvements and provides estimates of the growth rate of per capita comprehensive wealth over the period 1970-2006 for Indian economy. It considers air, water and soil degradation along with energy, minerals and forests depletion. To measure the value and composition of investment in natural capital, it estimates resource depreciation allowances on the basis of Hotelling rent; it adjusts education expenditure for depreciation in human capital; and uses the estimates of TFP that takes into account natural capital in the production of commodities and services. The empirical application suggests that Indian economy is barely sustainable. Growth rate of per capita comprehensive wealth was virtually near zero, it was only 0.15 percent per year for the study period. The growth rate was negative till 1983. Thereafter it became positive; however it was less than one percent in 1980s and 1990s. In recent years the growth rate was about 4 percent. Despite certain limitations, the study underscores the need for vigorous public policies that help in preventing excessive resource depletion and promoting higher genuine investment.Sustainability, development, Comprehensive wealth, Hotelling rent, India

Measurement of environmental efficiency and productivity: A cross country analysis.

This paper measures environmental efficiency (EE) and environmental productivity (EP) and analyses differences in these across countries. It explores the macroeconomic factors that could explain these differences and whether these differences can be explained by income levels and by the degree of openness in these countries. The EE index is found to be almost steady over the period 1971-92 for the annex-I countries, while its value is declining for non-annex-I countries over this period. The EP index increased over this period in both groups of countries. In the annex-I countries, EE exhibits an inverted `U' shape with respect to per capita income while it is `U' shaped for the non-annex-I countries. This study also finds that while the EP index increases with income in annex-I countries it is decreasing in the non-annex-I countries. The degree of openness has a significant negative impact on EE and EP in both groups of countries.Environmental efficiency ; Environmental productivity ; Distance function ; Per capita income ; Openness

Resource use efficiency of US electricity generating plants during the SO2 trading regime: A distance function approach.

This paper measures resource use efficiency of electricity generating plants in the United States under the SO2 trading regime. Resource use efficiency is defined as the product of technical efficiency and environmental efficiency, where the latter is the ratio of good output (electricity) to bad output (SO2) with reference to the best practice firm, i.e., one that is producing an optimal mix of good and bad outputs. This concept of environmental efficiency is similar to that of output oriented allocative efficiency. Using output distance functions we compare three methods for the calculation of resource use efficiency, namely, stochastic frontier analysis (SFA), deterministic parametric programming and nonparametric linear programming. This paper reveals the strengths and weaknesses of these methods for estimating efficiency. Both SFA and linear programming approaches can estimate the efficiency scores. For plants in the dataset the overall geometric mean of the three methods for technical efficiency, environmental efficiency and resource use efficiency is 0.737, 0.335 and 0.248, respectively. The rank correlation coefficient between technical efficiency, environmental efficiency and resource use efficiency is 0.213, 0.617 and 0.877, respectively. The regression analyses of performance across plants shows units in phase I of the SO2 trading programme are negatively related to measures of economic and environmental performance. This suggests that the market for SO2 allowances, per se, may not be minimizing compliance cost. We also find that a decrease in SO2 emission rates not only increases environmental efficiency but also leads to an increase in resource use efficiency. This finding concurs with the hypothesis that enhancement in the environmental performance of a firm leads to an increase in its overall efficiency of resource use as well.Technical efficiency ; Environmental efficiency ; Resource-use efficiency ; Distance functions ; SO2 allowance program