Analysis of Korean firms’ green productivity using the MML model

Abstract

This study aims at examining the green productivity of large GHG emitter industries in Korea. Six industries, namely power, steel, petrochemical, paper, cement, and electronics, were selected as the sample. As each of these industries exhibits different characteristics, a methodology that considers heterogeneity – the metafrontier Malmquist–Luenberger index (MML) – was used. The MML index was decomposed into three indexes: the efficiency change (EC) index, best-practice gap change (BPC) index, and technical gap ratio change (TGC) index. The empirical results are as follows. First, there was an average increase of 5.8% in the MML index, which indicates that the overall green productivity had increased over the last 5 years. It is noteworthy that there was a drastic increase in 2015, indicating the positive influence of the emission trading scheme (ETS) on green productivity. Moreover, the cement industry showed the best performance in green productivity. Second, in terms of the three indexes, EC and TGC showed values higher than unity, which implies that these are the major factors driving the positive MML value. Last, some innovator firms fulfilling the three conditions concerning the BPC index have been identified, and can be considered role models for other firms.

Keywords

• green growth policy
• green productivity
• directional distance function
• metafrontier malmquist–luenberger
• korea