Abstract:
The following three essays explore the use of the directional output distance
function (Chambers et al., 1996), an economic model originally developed to
measure efficiency and productivity for multi-input and multi-output production
processes, to assess performance for multi-attributed environmental
processes.
The first essay illustrates the use of the directional output distance
function to construct environmental indices. This model can be used to
aggregate multiple environmental attributes into one measure of performance
(distance to the frontier) just as an environmental index seeks to
combine multiple attributes into one composite measure of performance. A
nonparametric directional output distance function is estimated for a set
of biological indicators that were collected to assess stream condition as
part of a national study conducted by the U.S. Environmental Protection
Agency (EPA). Modeling these indicators as outputs, the directional output
distance function yields a similar measure of performance to the existing
EPA index for this data.
The second essay uses the directional output distance function to derive
estimates of marginal performance for each of the biological indicators
from the first essay, where marginal performance is defined as the degree
to which increasing each of the indicators reduces an observation's distance
to the output frontier. The directional output distance function is estimated
parametrically, using the quadratic form. The resulting estimates of
marginal performance are then used to develop a metric-weighting scheme
that incorporates each metric's marginal contribution to performance, at
each site, and to then construct an individually-weighted version of the
original equally-weighted EPA index.
The third essay uses the directional output distance function to derive
shadow price estimates for a set of non-marketed wetland functions in the
U.S. mid-Atlantic region Nanticoke River Watershed. The results suggest
that for some sites in this watershed, the value of improved wetland condition
outweighs the potential value of agricultural production. The average
estimated values are also consistent with payments being made by the federal
Wetlands Reserve Program (WRP) in the study area.
