Shadow prices and pollution costs in U.S. agriculture

Pollution shadow prices in conventional and organic farming: an application in a Mediterranean context

“…In the second place, apart from this divergence on what is measured and how it is expressed, there are also differences regarding the methodologies employed, that vary from the calculation of the shadow price based on the dual values obtained from the restrictions of a non-parametric DEA model (Piot-Lepetit and Vermersch, 1998;Oude-Lansink and Silva, 2004) to calculations based on the duality between the output (input) distance function and the revenue (cost) function by parametric estimations (Shaik et al, 2002;Färe et al, 2006). Moreover, the differentiated treatment given to the environmentally detrimental variables, which can be treated as inputs or undesirable outputs and, also, the consideration of the strong/weak disposability hypothesis, contribute to a rather constrained comparability of results.…”

“…For instance, the majority of literature references express the shadow price as euros per additional euro spent on either nitrogen or pesticides, whereas we express the shadow price as euros per additional kg of nitrogen surplus or additional EIQ unit. In addition, Färe et al (2006) express the shadow price of nitrogen leaching and runoff as index of crop revenue per index of leaching.…”

“…Again, dryfarming conditions may help to explain this divergence in shadow price values. Färe et al (2006) express the shadow price and the relationship between pollution costs and revenues, for those units located on the frontier in US states agriculture. The relationship between pollution costs and revenues varies between 5 and 15%, which is considered a coherent result with respect to other measures of the cost of pollution in agriculture.…”

“…For instance, Picazo-Tadeo and Prior (2009) propose a two stage process in the context of efficiency measures. Färe et al (2006) give a specific definition of directional weak disposability which, in the last instance, means treating the bad output as an input. Without getting into deeper arguments on this debate, the use of a ≤ restriction 4 for undesirable outputs in the specification of the distance function allows attributing null value to the shadow price of those super-polluting units that, after having good and bad output increased and decreased, respectively, according to the distance function used in this work could subsequently increase efficiency by reducing pollution.…”

Estimating the Marginal Abatement Cost Curve of CO2 Emissions in China: Provincial Panel Data Analysis

“…To estimate the shadow price, we employ the quadratic functional form to parameterize the directional output distance function and set the directional vector ( , ) (1,1) y b g g = to seek a simultaneous expansion of good output and reduction of bad output (Chambers et al, 1998;Färe et al, 2005;Färe et al, 2006;Murty et al, 2007).…”