Environmentally adjusted productivity and efficiency: a review of concepts, methods and empirical work

Since the early 1990s environmental effects from economic activities have been incorporated in the productivity and efficiency modelling framework. A number of environmentally adjusted productivity and efficiency models are developed and applied in various contexts. This chapter highlights the theoretical and empirical studies that have gained prominence in the area of environmentally adjusted productivity and economic efficiency measurement in recent decades. It critically overviews the concepts and methods that have been used in measuring environmentally adjusted productivity and economic efficiency. It also provides detailed analysis of some of the recently developed models that can be applied to measure environmentally adjusted efficiency of the sectors of the economy.