A frontier functions approach to optimal scales of sustainable production

Hoang, Viet-Ngu (2014) A frontier functions approach to optimal scales of sustainable production. Environment and Development Economics, 19, pp. 566-584.

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Abstract

This paper translates the concepts of sustainable production to three dimensions of economic, environmental and ecological sustainability to analyze optimal production scales by solving optimizing problems. Economic optimization seeks input-output combinations to maximize profits. Environmental optimization searches for input-output combinations that minimize the polluting effects of materials balance on the surrounding environment. Ecological optimization looks for input-output combinations that minimize the cumulative destruction of the entire ecosystem. Using an aggregate space, the framework illustrates that these optimal scales are often not identical because markets fail to account for all negative externalities. Profit-maximizing firms normally operate at the scales which are larger than optimal scales from the viewpoints of environmental and ecological sustainability; hence policy interventions are favoured. The framework offers a useful tool for efficiency studies and policy implication analysis. The paper provides an empirical investigation using a data set of rice farms in South Korea.

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ID Code: 78082
Item Type: Journal Article
Refereed: Yes
Additional URLs:
DOI: 10.1017/S1355770X14000023
ISSN: 1355-770X
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Economics & Finance
Copyright Owner: Copyright 2014 Cambridge University Press
Deposited On: 28 Oct 2014 23:10
Last Modified: 01 Nov 2014 14:13

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