Abstract
We estimate capacity when firms produce both desirable and undesirable outputs using a directional distance function model, and a hyperbolic model. We impose different assumptions regarding disposability of undesirable outputs in both models, and vary the direction of vectors in the directional distance function model. We then apply the methods to data from fishing vessels operating in the northwest Atlantic Ocean during a 3-year period. Results differ from previous studies that examined technical efficiency for similar vessels and show that it is difficult for fishing vessels to reduce undesirable outputs without reducing desirable outputs.
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Notes
The first attempt that we are aware of to assess capacity in a fishery with undesirable outputs was a report by Färe et al. [2007].
A third approach developed by Seiford and Zhu [2002] is not discussed here. Their model permits the expansion of desirable, and contraction of undesirable outputs and does not require “null-jointness” as the directional distance function model does. However, as noted by Färe and Grosskopf [2004b], their approach does not impose weak disposability and thus may be limiting in assessing efficiency and capacity in the presence of undesirable outputs.
We used a simple linear aggregation into four product groups. Alternatively, we could have constructed only two output groups, one for desirable and one for undesirable outputs, or used a weighted output measure. We do not believe that these alternative approaches would have changed the ranking of our results.
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Acknowledgements
The authors thank Phil Logan, Fred Serchuk, three anonymous reviewers, and the editor for useful comments and suggestions. This research was sponsored by the National Marine Fisheries Service, Office of Science and Technology, Economics & Social Analysis Division. The views expressed do not reflect the position of Oregon State University, the Virginia Institute of Marine Sciences, or the National Marine Fisheries Service.
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Färe, R., Kirkley, J. & Walden, J. Measuring Fishing Capacity When Some Outputs Are Undesirable. Eastern Econ J 37, 553–570 (2011). https://doi.org/10.1057/eej.2010.7
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DOI: https://doi.org/10.1057/eej.2010.7