Shadow prices of environmental outputs and production efficiency of household-level paper recycling units in Vietnam

Article history: Received 8 May 2006 Received in revised form 10May 2007 Accepted 1 June 2007 Available online 13 July 2007 Theproduction efficiency and shadowprices of three environmental outputs (BOD,COD, andSS) of 63 household-level paper-recycling units, from a recycling craft village in Vietnam, are assessed A two-stage procedure, linear programming and stochastic estimation, is used to estimate output distance function. Social capital as a production factor and environmental outputsare included in theoutputdistance function.Results indicate thatproductionefficiencies could potentially be improved by 28%. There is a substantial variation in the shadow prices of environmental outputs among the production units of different types of paper products. Furthermore, the average shadowprices of the three environmental outputs are all positive. This indicates a potential for improving environmental quality though introducing pollutionprevention methods to paper-recycling production processes in Vietnam (e.g., recirculation of wastewater), and suggests that it may be inappropriate to restrict the shadow prices of environmental outputs to be non-positive for the analysis of some production processes. © 2007 Elsevier B.V. All rights reserved.