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Rolf Färe and Shawna Grosskopf

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Rolf G. Färe, Shawna Grosskopf and Carl A. Pasurka Jr.

One approach used to calculate the costs and productivity changes associated with pollution abatement involves modeling the joint production of good and bad outputs. The joint production model treats the process of transforming inputs into good and bad outputs as a black box. We investigate the consequences of generalizing the transformation process by introducing a network technology that looks inside the black box, which consists of a set of sub-technologies or sub-processes. Both models are operationalized using a panel dataset of coal-fired power plants to compare empirical results generated by the two specifications of the production technology.