A conditional directional distance function approach for measuring regional environmental efficiency: Evidence from UK regions

This paper, by using conditional directional distance functions as introduced by Simar and Vanhems [J. Econometrics 166 (2012) 342–354] modifies the model by Färe and Grosskopf [Eur. J. Operat. Res. 157 (2004) 242–245] and examines the link between regional environmental efficiency and economic growth. The proposed model using conditional directional distance functions incorporates the effect of regional economic growth on regions’ environmental efficiency levels. The results from UK regional data reveal a negative relationship between regions’ GDP per capita and environmental inefficiency up to a certain GDP per capita level. After that level it appears that the relationship becomes positive. As an overall result the regional environmental inefficiency-GDP per capita relationship appears to have a ‘U’ shape form.

► We model growth effect using conditional directional distance functions with bad outputs.
► As an illustrative example we use NUTS 2 level data from the UK regions.
► The results reveal a U-shape relationship between regions growth and environmental inefficiency.