Measuring environmental efficiency in relation to socio-economic factors: A two stage analysis

Abstract

The purpose of this study is to estimate the efficiency exemplified by a production function of EU-28 countries from 1995 to 2019. We explore the capability of these countries to convert in an environmentally efficient way, the typical inputs of labor force, capital stock together with energy and land use into desirable (GDP) and undesirable (CO2, CH4) outputs. The countries in question are divided into groups that allow scientific comparison between static and dynamic specifications. The estimation results of the static frontiers when compared to the dynamic ones indicate an underestimation for some groups during the period under consideration. In the second stage the main determinants necessary to be considered for benchmarking of static and dynamic efficiency scores are explored using static specifications of the Simar–Wilson regression and FEs panel data analysis and the dynamic effects of the generalized method of moments (GMM). The findings may help policy makers to plan efficient strategies taking into consideration the effects of economic growth, industrialization, urbanization and the population density. © 2022 Economic Society of Australia, Queensland