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International Journal of Management and Sustainability

February 2019, Volume 8, 2, pp 79-87

Cost Efficiency of Bioenergy Industry and its Economic Determinants in EU-28: A Tobit Model Based on DEA Efficiency Scores

Mohd Alsaleh

,

A.S. Abdul-Rahim

Mohd Alsaleh 1 ,

A.S. Abdul-Rahim 1 
  1. Universiti Putra Malaysia, Malaysia 1

Pages: 79-87

DOI: 10.18488/journal.11.2019.82.79.87

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Article History:

Received: 17 January, 2019
Revised: 08 March, 2019
Accepted: 15 April, 2019
Published: 12 June, 2019


Abstract:

This study looks at how increasing efficiency drives the production of the bioenergy in the European Union (EU-28) region. The paper used the Data Envelopment Analysis (DEA) statistical approach to use the cost efficiency (CE) rate of the bio-energy industry of the EU-28 region as a dependent variable of this study in the first stage of analysis. The study’s second stage analysis used the Tobit Model to investigate the impact of economic determinants on the CE of the bioenergy industry in the EU-28 region during the period between 1990 to 2013. The results of the second stage panel regression using Tobit model for the EU-28 region during 1990-2013 shows that CE has positive and significant correlations with capital cost (lnCI) and labour cost (lnLI). The results also show that cost efficiency and real interest rate (lnRIR).have a negative and significant relationship. The study showed that gross domestic product (lnGDP) and CE have a positive and significant relationship in the time specific model, but not in the country specific model. In addition, there is significant and positive correlations between CE and both the Interaction Dummy Country factor (Dum_CP) and the Country Dummy factor (Dum). The estimation also showed insignificant correlations between CE and both the Interaction Dummy Time factor (Dum_CP) and the Time Dummy factor (Dum).
Contribution/ Originality
This study contributes to the existing literature in investigating the CE of the bioenergy industry in the EU-28 region. This study uses new estimation methodologies such as the Data Envelopment Analysis (DEA) and the Tobit Model to investigate the impact of economic determinants on the CE of the bioenergy industry in the EU28 region during the period between 1990 and 2013.

Keywords:

Bioenergy industry, Cost efficiency, Capital cost, Labour cost, Gross domestic product, Real interest rate, EU-28 region.

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Funding:

This study received no specific financial support.

Competing Interests:

The authors declare that they have no competing interests.

Acknowledgement:

Both authors contributed equally to the conception and design of the study.

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