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A Production Function Approach to Regional Environmental-Economic Assessments
Citation:
MACPHERSON, A. J., P. P. PRINCIPE, AND E. R. SMITH. A Production Function Approach to Regional Environmental-Economic Assessments. ECOLOGICAL ECONOMICS. Elsevier Science Ltd, New York, NY, 69(10):1918-1925, (2010).
Impact/Purpose:
Regional-scale environmental assessments require integrating data sets from a variety of sources collected for diverse purposes and having inconsistent spatial or temporal scales. Moreover, the environmental processes and the relationships among variables in the assessment tend to be poorly understood. Including socioeconomic variables only exacerbates the situation. Regional assessments often use multivariate statistics to describe the relationships between these variables, but multivariate analyses frequently reduce data dimensionality (James and McCulloch, 1990; Tran et al., 2006) and can be difficult to interpret by both the analyst and the intended audience (planners and managers).
Description:
Numerous difficulties await those creating regional-scale environmental assessments, from data having inconsistent spatial or temporal scales to poorly understood environmental processes and indicators. Including socioeconomic variables further complicates the situation. In place of empirical or process-based regional environmental assessment models, we propose a nonparametric outcomes-based approach using a directional distance function from the efficiency and productivity analysis literature. The regional environmental-economic production function characterizes the relative efficiency of geographic units in combining multiple inputs to produce multiple desirable and undesirable socioeconomic and environmental outputs. This production function makes no assumptions about the functional relationships among variables, but by quantifying the extent to which desirable outputs can be expanded and inputs and undesirable outputs can be contracted, the production function can help decisionmakers identify the most important broad-scale management and restoration opportunities across a heterogeneous region. A case study involving 134 watersheds in the Mid-Atlantic region of the United States indicates that, depending on which outputs are specified as desirable in the models, a quarter to a third of the watersheds are efficient in producing desirable outputs and minimizing inputs and undesirable outputs. Including socioeconomic indicators tends to reduce watershed efficiency as compared to models that only use environmental indicators. Efficiency levels also appear to be correlated with Ecoregions.