Essays in productivity and efficiency analysis in the presence of undesirable outputs

In the first essay we study commensurability property of the directional distance function (DDF). We find that a popular DDF with a fixed directional vector is neither absolute nor ranking commensurable. Nevertheless, this function can be commensurated if the directional vector is commensurated along with the data. We identify a necessary and sufficient condition for a vector that ensures commensurability of the DDF, which helps somewhat narrowing down the key issue for this function in practice—the choice of direction of measurement. In the second paper I test the performance of smooth homogeneous bootstrap bias-correction in multi-output frontier models using hyperbolic efficiency function. I propose an approxima¬tion procedure that substantially reduces the nonparametric estimation time while sacrificing little precision compared to the most precise nonparametric alternative. The performance of the uncorrected and bias-corrected estimates is tested in samples of different sizes via Monte Carlo simulation. All techniques perform well in large samples even without correction. Both parametric and nonparametric estimators benefit from the correction regardless of the sample size. Uncorrected nonparametric estimators perform well in large and require bias-correction in smaller samples. In the small samples bias correction shows marginally better results when applied to the parametric estimator. The final paper studies the effects of nontradeable emission quota and transferable emission quota systems on the accumulation of capital and output growth in small open economies. Both types of regulation impede the growth. The transferable emission quota system has different effects on the development of quota buyers and quota sellers. While quota buyers enjoy faster growth in the both capital stock and output as compared to the nontransferable quota system, quota sellers face slower capital accumulation and economic growth. The simulation using advances in frontier modelling confirms the theoretical findings and reveals that developmental consequences for quota sellers range from a slower capital accumulation to capital stock shrinkage. It also suggests that quota sellers substitute economic production for quota revenues and economic output falls over time.