The continuous striving for economic growth in both developing and developed countries is accompanied by a range of environmental problems that hamper sustainable development. The economic development through agricultural and industrial intensification combined with natural resource extraction has generated various environmental problems such as resource depletion, waste generation, and pollution. A proper measurement of environmental problems is a major issue in the debate on the economic growth and environmental protection. This measurement problem is closely linked to the tradeoffs between economic growth and environmental damage both of which determine overall social wellbeing. Therefore, the existing tradeoffs between rapid economic development and environmental degradation need to be taken into consideration to sustain the economic growth with least environmental damage. From this perspective, it is necessary to study the tradeoffs between economic outcomes and environmental degradation to achieve the long term ‘sustainable development’ goal of any production process. In recent years, environmental performance indicators that incorporate joint production of economic and environmental goods in the production technology have been designed and applied as useful analytical tools in studying the possibilities for improvement in economic and environmental performance of productive units or industries. In particular, Data Envelopment Analysis (DEA) based non-parametric approaches are gaining popularity in the measurement of environmental performance in terms of efficiency and productivity, accounting for the presence of environmental pollution or degradation. A key advantage of DEA over other conventional economic methods is that it more easily accommodates both multiple inputs and multiple outputs including the environmental attributes in measuring relative efficiency of production units. vi The concept of directional distance function is one of the approaches which have proved to be very useful in modelling production in the presence of undesirable outputs. It credits production units for simultaneous expansion of desirable outputs and contraction of undesirable outputs. The present study uses directional distance functions to measure the tradeoffs between economic benefit and environmental degradation of shrimp farming in Bangladesh. While shrimp farming in Bangladesh has great economic benefit in terms of foreign exchange earnings and livelihood improvements of coastal communities, it has been criticised for its adverse environmental effects in terms of increased soil and water salinity, loss of wild fish stock, and mangrove forest destruction. Therefore, investigation of the tradeoffs between the economic and environmental effects of shrimp farming is essential to facilitate policies aimed at achieving sustainability of this industry. Keeping this in mind, the thesis proceeds with three separate research papers. The abstract of these three papers are given below: Paper 1: Environmental Effects of Shrimp Farming: International and Bangladeshi Perspectives Abstract: Shrimp farming is the fastest growing aquaculture sector in the world, and it has become a major economic activity in many tropical countries over the past several decades. The support from international donor agencies in combination with potential for high profit, buoyant demand for high-value sea-food products, limitation and fluctuations in capture fisheries, and the industry’s capacity to earn foreign exchange and generate employment in poor coastal areas of developing countries led to rapid expansion of shrimp farming. Although shrimp farming has brought significant economic benefit to the producing countries, it has also been criticized for an extensive environmental degradation and subsequent social conflicts. Adverse environmental effects related to shrimp aquaculture have been widely reported in the literature, questioning the sustainability of this industry. The purpose of this paper is to identify the sources of perceived tradeoffs between economic and environmental attributes of shrimp farming by reviewing previous published work. This will provide vii a foundation and a synthesis of the knowledge on economic and environmental dynamics of shrimp aquaculture and will provide substantial inputs that will direct the further research to estimate the tradeoffs which can contribute to the sustainability of this industry. Paper 2: Tradeoffs between Economic and Environmental Effects of Shrimp Farming in Bangladesh Abstract: Shrimp farming has experienced a spectacular growth in the coastal areas of Bangladesh, benefiting the economy enormously. However, the economic benefits are paralleled with substantial environmental and natural resource degradation that can be attributed to shrimp farming. This study evaluates the economic and environmental efficiency of shrimp farms to measure the perceived tradeoffs. A directional output distance function approach is used to measure efficiency of shrimp farms in presence of ‘desirable’ and ‘undesirable’ outputs. The study covers the major shrimp farming regions in Bangladesh, and evaluates their performance at two time points, the years 2000 and 2010. Performances of farms are investigated under four different directional vectors. Moreover, Environmental Efficiency Index (EEI) is estimated using alternative assumptions of weak and strong disposability of outputs. Empirical results indicate that on average, efficiency of shrimp farms decreased in Southwest region and increased in Southeast region over the last decade. The average EEI is found to be steady between 2000 and 2010. The identified tradeoffs between the desirable and undesirable outputs (economic and environmental effects) will provide policy makers with indication on how to devise balanced policies to improve current operations and enhance sustainability. Paper 3: Productivity Growth in the Shrimp Farming Industry of Bangladesh: A Luenberger Productivity Indicator Approach Abstract: Shrimp aquaculture is one of the fastest growing economic activities in the coastal areas of Bangladesh and earns substantial foreign exchange for the country. viii However, the environmental degradation is a major concern for the sustainable development of this industry. This paper studies the tradeoffs between the economic and environmental performance of shrimp farming in terms of productivity measurement. A directional distance function approach is employed to estimate the Luenberger total factor productivity indicators under the assumptions of weak and strong disposability of undesirable outputs. Based on average farm level data from shrimp farming, this study estimates the productivity change between the year 2000 and 2010 and compares how the different directional vectors and output sets influence the productivity. The Luenberger indicators are further decomposed into efficiency change and technical change components to explain the source of productivity change. The results show that overall the productivity of shrimp farms has decreased in most districts, except Cox’s Bazar and Chittagong districts. For most of the farms, the negative productivity growth was driven by the negative technological change. The productivity growth is an indication of sustainable development. Therefore, true productivity growth including economic and environmental performance needs to be considered in developing effective policy measures to attain sustainable development of the shrimp farming industry. Overall, the thesis overviews the initial knowledge base about the sources of perceived tradeoffs between the economic and environmental effects of shrimp farming and goes on to apply for the first time the techniques of productivity and efficiency measurement to evaluate the tradeoffs between economic benefit and environmental cost of shrimp farming in Bangladesh. The estimated efficiency and productivity measures consider the economic benefits as well as environmental degradation and therefore represent a more holistic picture of the true performance of shrimp farms. Therefore, it is expected that the result can have a significant contribution in the policy context. Sustainability of shrimp farming is a major concern for Bangladesh, which can be achieved by better economic and environmental performance of shrimp farms. The results will help the policy makers in understanding the tradeoffs between the economic (desirable) and environmental (undesirable) outputs which will assist them in designing appropriate policies
