Production and safety efficiency evaluation in Chinese coal mines: accident deaths as undesirable output (Q2196103)

The authors of this article focus on two aspects of coal production in China. Firstly, they note that China is the largest producer of coal in the world, representing almost half of worldwide yield. Nonetheless, China's coal extraction conditions rank last among the major coal delivering nations. For example, gas content is high in many coal mines, while in some of them, the hydrogeological conditions are of involved and complex nature. These are conditions necessitating subsequently the provision of extra safety measures that may be at the expense of output supply. At the same time, the authors of the paper note that more workers rather than physical capital are involved in the coal production process. It follows policy-wise that the would-be reduction in output in response to better safety measures might be offset by reducing the labor-intensiveness of its production. Moreover, better technology will reduce casualties by itself, since one reason they are high is the many workers in the coal mines. This is a point of the narrative presented by the authors that is not addressed adequately by their paper. Analytically, contrary to the existing studies of coal production efficiency which are based on traditional Charnes-Cooper-Rhodes (CCR) or Banker-Charnes-Cooper (BCC) type of models without considering accident deaths, this paper approaches coal industry as one producing two outputs: a desirable output, coal; and an undesirable one, accident deaths. As an undesirable output, such deaths play a key role in equitable efficiency evaluations and comparisons, which, however, is neglected by the literature. This study, tries to fill this gap and measure the productive efficiency of Chinese coal mines using a directional-distance-function (DFF) model, which provides an easy way to treat an undesirable output. The empirical results indicated that Chinese coal mines have poor total factor humanitarian-production efficiency with a downward trend, and nearly half of the production potential remained unexploited over these years. If all the coal mines operate at fully efficient levels in safety management, half of the accident deaths can be avoided, which is equal to the lives of 425 workers in 2014. Also, the directional contribution analysis pointed out that southern provinces should pay more attention to accident deaths than northern ones. Safety oriented measures are next proposed policy-wise without addressing adequately the issue of capital intensity in production.