Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/137590
Authors: 
Hampf, Benjamin
Year of Publication: 
2015
Series/Report no.: 
Darmstadt Discussion Papers in Economics 226
Abstract: 
In this paper we propose a stochastic formulation of the materials balance condition which imposes physical constraints on production technologies. The estimation of the model involves a composed error term structure that is commonly applied in the literature on stochastic frontier analysis of productive efficiency. Moreover, we discuss how OLS, maximum likelihood and Bayesian methods can be used to estimate the proposed model. In contrast to previous approaches our model allows to estimate the physical limitations to production possibilities in the presence of statistical noise and depends on substantially weaker data requirements. We demonstrate the applicability of our new approach by estimating the materials balance condition for SO2 and CO2 using a sample of fossil-fueled power plants in the United States.
Subjects: 
Materials balance condition
Abatement efficiency
Stochastic frontier analysis
Laws of thermodynamics
Applied econometrics
Environmental economics
JEL: 
Q53
C51
Q40
D24
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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