Energy price-induced and exogenous technological change: Assessing the economic and environmental outcomes

In this paper, we distinguish between factor/output substitution and shifts in the production technology frontier. Our model includes the by-products of carbon dioxide and sulfur dioxide emissions where the function requires the simultaneous expansion of good outputs and reductions in emissions. We estimate a directional output distance function for 80 countries over the period 1971–2000 to measure the exogenous and oil price-induced technological change. On average, we find substantial oil price-induced technological progress at the world level when long-term oil prices are rising, although the growth rate is more volatile in developed countries than in developing countries. The results also show that developed countries experience higher exogenous technological progress in comparison with developing countries, and the gap between the two has increased during the period of our study.     

A Tradable Permit System in an Intertemporal Economy

It is known that in an intertemporal competitive economy, a tradable permit system may not achieve efficiency without setting appropriate permit interest rates (i.e., rewards for holding permits). To find the rates, however, we need to know in advance the path of efficient permit prices, which is difficult to obtain. This study intends to solve this problem in two ways. First, we analyze a special case in which the permit interest rates are given by a simple rule. For example, if the marginal abatement cost of pollution emission is constant, then the appropriate rate is to equal the monetary interest rate. As is the case for global warming, if the damage is caused in the future far beyond the planning period of the environmental program, the appropriate rate coincides with the marginal self-recovery of environmental stock under certain conditions. As a second approach, we propose a tradable permit system with a permit bank, as a mechanism by which the permit interest rates are generated endogenously without governmental intervention other than the issuance of permits. However, we also show that this approach raises the problem of indeterminacy of the equilibrium.     

Compensation for environmental services and intergovernmental fiscal transfers: The case of India

This paper studies mechanisms to compensate local government for the public provision of environmental services using the theory of optimal fiscal transfers in India. Especially, we analyzed the role of intergovernmental fiscal transfers in achieving the environmental goal. Simply assigning the functions at appropriate levels does not ensure optimal provision of environmental services. Optimality in resource allocation could be achieved by combining the assignment system with an appropriate compensation mechanism. Intergovernmental fiscal transfers would be a suitable mechanism for compensating the local governments and help in internalizing the spillover effects of providing environmental public goods. Illustrations are also provided for India.     

Do environmental,social, and governance activities improve corporate financial performance?

This study investigated the relationship between corporate efficiency and corporate sustainability to determine whether firms concerned about environmental, social, and governance (ESG) issues can also be efficient and profitable. We applied data envelopment analysis to estimate corporate efficiency and investigated the nonlinear relationship between corporate efficiency and ESG disclosure. Evidence shows that corporate transparency regarding ESG information has a positive association with corporate efficiency at the moderate disclosure level, rather than at the high or low disclosure level. Governance information disclosure has the strongest positive linkage with corporate efficiency, followed by social and environmental information disclosure. Moreover, we explored the relationship between particular ESG activities and corporate financial performance (CFP), including corporate efficiency, return on assets, and market value. We found that most of the ESG activities reveal a nonnegative relationship with CFP. These findings may provide evidence about voluntary corporate social responsibility strategy choices for enhancing corporate sustainability.     

Feasibility and optimality of sustainable growth under materials balance

Pollution from consumption and production is an inevitable part of economic processes. We employ a materials balance approach and develop an endogenous growth theory, with recycling activity, to examine the evolution of the economic and environment systems. This paper provides feasibility and optimality conditions for sustainable economic growth with rising environmental quality. The fundamental condition of feasibility is that the flow of natural resources, which eventually returns to the environment as waste and pollution, has a negative growth rate in the long run.     

Corporate Environmental and Economic Performance of Japanese Manufacturing Firms: Empirical Study for Sustainable Development

This study examines the relationship between environmental performance and economic performance in Japanese manufacturing firms. The environmental performance indicators include CO₂ emissions and the aggregate toxic risk associated with chemical emissions relative to sales. Return on assets (ROA) is used as an indicator of economic performance. We demonstrate that there is a significant inverted U‐shaped relationship between ROA and environmental performance calculated by aggregated toxic risk. We also find that the environmental performance increases ROA through both returns on sales and improved capital turnover. However, we observe a significant positive relationship between financial performance and environmental performance based on CO₂ emissions. These findings may provide evidence for the consequences of firms' environmental behavior and sustainable development. Copyright © 2012 John Wiley & Sons, Ltd and ERP Environment.     

Productivity growth and biased technological change in Japanese airports

In this paper, the productivities of Japanese airports over the period of 1987–2005 are analyzed using the Malmquist index, and technological bias is investigated. During this period, airports on average became less efficient and experienced technological regress. Our results indicate that the traditional growth accounting method, which assumes Hicks neutral technological change, is not appropriate for analyzing changes in productivity for Japanese airports.     

Measuring the Effect of Economic Growth on Countries’ Environmental Efficiency: A Conditional Directional Distance Function Approach

Using a recently developed probabilistic approach of a conditional directional distance function, we measure the effect of economic growth on countries’ environmental efficiency in carbon dioxide emissions for a sample of 99 countries over the period of 1980–2010. Our approach directly accounts for the exogenous factors influencing countries’ environmental production; therefore, we do not impose the separability condition on the estimated environmental efficiencies. When examining the entire sample as well as the sample of developed countries, our results reveal an inverted U-shaped relationship between countries’ GDP per capita and environmental efficiency. However, when examining the relationship for the sample of developing countries, the results reveal an N-shaped form. Moreover, our results show that countries ratifying the Kyoto Protocol tend to have higher efficiency scores, implying that their mitigation activity is less costly.     

Bank efficiency,productivity, and convergence in EU countries: a weighted Russell directional distance model

The objective of this study is three-fold. First we estimate and analyse bank efficiency and productivity changes in the EU28 countries with the application of a novel approach, a weighted Russell directional distance model. Second, we take a disaggregated approach and analyse the contribution of the individual bank inputs on bank efficiency and productivity growth. Third, we test for convergence in EU28 bank productivity as well as in the inefficiency of individual bank inputs. We find that bank efficiency has been undermined by the financial crisis in banks notably from the EU15 countries. We also argue that bank efficiency and productivity in EU countries vary across the banking sector with banks from the ‘old’ EU showing higher efficiency levels. Nonetheless, a noticeable catching up process is observed for banks from the ‘new’ EU countries. Consequently, we do not find evidence of group convergence for bank productivity but there is evidence of convergence in bank efficiency change and technical change among the EU28 countries throughout the period 2005–2014. The driving force seems to be convergent technical change from the old EU member states’ banks. On the other hand, almost no convergence is detected for the banks’ individual inputs while the transition paths show heightened diversity during the crisis years.     

Does doing “good” always translate into doing “well”? An eco‐efficiency perspective

Does doing “good” always translate into doing “well”? Debate over the “value” of corporate social responsibility is high on the agenda of corporate finance research. Deeper understanding is required on managers' incentives to pursue and implement corporate social responsibility related strategies, as is more thorough comprehension of the effect of these strategies to firms' performance levels as well as shareholder and wider stakeholder valuations of the firm. This paper provides a new lens by approaching the subject from a different methodological paradigm, grounded in the performance benchmarking methods more commonly applied in operational research. In so doing, we provide novel evidence of the effect of corporate choices on environmental, social, and governance (ESG) strategic investment compliance (i.e., doing good) to firms' eco‐efficiency levels (doing well). In brief, our empirical findings suggest that ESG and firm's eco‐performance are nonlinearly related. Specifically, advanced ESG policies and disclosure levels are associated with a positive affect to firms' eco‐efficiency levels, but only up to a point, after which the effect becomes “neutral,” that is, ESG demonstrates a visible pattern of diminishing marginal returns. Thus, we may humbly conclude that a firm may “do well” by doing good, but it is not clear they should ever expect to “do great” just by “doing good.” The threshold at which this “neutrality” appears varies systematically with the characteristics of the sector in which the firm is operating, as well as dimensions of board diversity. Finally, it is evident that ESG implementation choices can be a source of managerial agency problems.