A Multi-stage Malmquist-luenberger Index Approach to Measure Environmental Productivity in China's Iron and Steel Industry

Abstract This paper develops a multi-stage Malmquist-luenberger index (MLPI) model by considering the joint production of desirable and undesirable outputs in multiple production processes. The proposed approach not only evaluates the environmental total factor productivity (ETFP) growth of the whole system but also investigate the progress and regress of each sub-process, i.e., the iron-making sub-process and the steel-making sub-process. Driving factors of ETFP change are identified through multi-stage MLPI decomposition. With an application of the proposed model in China's 48 iron and steel enterprises over the period of 2009-2013, the validity of the proposed models has been demonstrated. Moreover, this study explores the regional difference analysis of system and multi-stage ETFP among 31 provinces in eastern, central and western regions. Results show that the ETFP of system, iron-making sub-process and steel-making sub-process experienced increase annually, the most important finding is that the environmental efficiency increase is the most critical driving factor in promoting ETFP growth. Technical regression of steel-making sub-process is the main source of restricting system ETFP growth. In addition, the change of system ETFP varies greatly in different regions, being highest in the eastern region, and lowest in the western region. Compared with the single-stage conventional MLPI, the multi-stage MLPI is smaller and has more discriminatory power.