The Environmental Performance of the U.S. Agricultural Sector
This paper introduces an environmental performance index and evaluates the environmental performance of the U.S. agricultural sector. Our motivation for developing an index of environmental performance was to assess improvements in the ability of the agricultural sector to produce marketable agricultural outputs while minimizing environmental damage. Since our index is based on distance functions that are representations of technology, we are in effect measuring “environmental productivity”. And since these distance functions explicitly allow us to model joint production of good and bad outputs, and do not require information on shadow prices of “bads,” our index has fairly minimal data requirements. The distance function allows us to aggregate across multiple undesirable outputs (again without requiring information on shadow prices), allowing us to provide a stand-alone index of bad outputs as well. Our index of environmental performance is then constructed as the ratio of a quantity index of marketed agricultural outputs to the index of undesirable outputs.
KeywordsDistance Function Environmental Performance Agricultural Sector Undesirable Output Joint Production
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