A deterministic parametric metafrontier Luenberger indicator for measuring environmentally-sensitive productivity growth: A Korean fossil-fuel power case

This paper contributes to the current literature by proposing an alternative parametric metafrontier productivity approach called the deterministic parametric metafrontier Luenberger Productivity Indicator (DPMLPI) for measuring environmentally sensitive productivity growth incorporating technological heterogeneities. The Luenberger productivity indicator is constructed based on a quadratic output directional distance function with undesirable outputs, and then combined with the deterministic metafrontier to develop DPMLPI. The DPMLPI can be decomposed into efficiency change, technological change and productivity growth gap. The productivity growth gap can be further divided into efficiency change gap and technological change gap. The parametric linear programming technique is used to estimate parameters and construct the metafrontier. An empirical study for the Korean fossil fuel power industry at the plant-level is conducted for the 2003-2011 period. The results show a 0.15% increase in environmentally-sensitive productivity growth, which is mainly driven by environmental technological change. The oil-fired power plants show higher levels than the coal-fired ones of environmentally sensitive productivity growth and technological change performance. Some related policy implications are also proposed for the Korean fossil-fuel power sector.