Conclusions and Recommendations

5.1 Conclusions

In accordance with the recent environmental issues, the pollution which accompany with production activities cause the external cost. However, the external cost should be internalization.

Therefore, firms should eliminate pollution as possible to achieve efficiency. This research applies non-separable ‘good’ and ‘bad’ output model to intake undesirable output. There are three scenarios with different output combinations discussed before. Some major findings can be concluded as follows:

(1) Compared with conventional DEA model, the results from non-separable model are significantly different. Undesirable output causes some efficient firms to be inefficient. If the undesirable output accompany with production activities, it should be involved in the estimate model.

(2) The case study shows that there are approximately half of the firms efficient in the period of 2007-2010. Those firms operate 55% of total vehicle-kms and carry 57% of total passengers. Therefore, Taipei bus transit should be continuously improved.

(3) Firms may improve the efficiency by decreasing undesirable output. Two promising strategies are to periodically renew the parts related to emissions, such as exhaust system or catalytic converter, and introduction of green fuel.

Nevertheless, there is a limitation in this research—the data of undesirable output. The emission of CO is estimated by the bus firms, which may lead to a bias.

5.2 Recommendations

Further research could focus on the following:

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(1) The undesirable output is probably decreased by increasing some intermediate inputs, such as expenditure of maintenance and parts. To search related literatures to support certain intermediate inputs influence undesirable outputs, then including to the model. In addition, other types of undesirable outputs exist, e.g. noise and accidents. Those could be used as undesirable output variable. However, the more variables need the more DMUs.

(2) Investigating the efficiency of bus transit industry in different countries is another idea.

Compare with other advanced countries and follow the efficient ones.

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