The directional output distance function (Chambers, Chung, & Färe, 1996) is used to construct a Malmquist-Luenberger index of total factor productivity growth for manufacturing when both good and bad outputs are jointly produced. The index is constructed using information on good and bad output quantities and input quantities, circumventing the problem of recovering shadow price information for the bad output needed for the Fisher or Tornqvist type of productivity indices. Accounting for toxic releases in manufacturing, productivity growth averages 1.4% an-nually during 1988–1994. The findings also suggest that the failure to account for toxic releases in manufacturing results in a significant under-statement of total factor productivity growth.

Equality and efficiency are key issues in educational reform. Here the authors analyze the efficiency and equality consequences of various school finance reforms using a cost-indirect output distance function. This function readily models multiple-output production under conditions of budgetary constraint, and provides a natural measure of performance that is closely related to Farrell-type measures of efficiency. The analysis suggests that despite school district inefficiency, finance reforms can affect student achievement. However, any potential gains in output from redistribution are dwarfed by the potential gains from increased efficiency. More strikingly, the analysis demonstrates that budgetary reforms designed to equalize expenditures could actually increase the inequality of student achievement.