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Environmental efficiency improvement has played a crucial role in the theory and practice of stimulating clean production. This paper analyzes the interaction between environmental efficiency and output efficiency, particularly whether they reinforce each other or compete with each other, on the basis of a data set of 137 firms in the textile industry in China's Jiangsu Province. In the first stage, generalized data envelopment analysis is applied to calculate efficiency measures of energy, waste water, waste gas, soot, and output efficiency taking capital, labor, water, and energy as inputs, industrial output value as desirable output, and waste water discharges, waste gas and soot emissions as undesirable outputs. In the second stage analysis, a structural equation model with latent variables is applied to analyze the interaction between the latent variable environmental efficiency, measured by the four observed environmental indicators, and output efficiency, taking also into account the endogenous variable profit. The main outcomes of the structural equation model are the following. Firstly, environmental efficiency negatively impacts on profit while profit positively impacts on environmental efficiency. In a similar vein, output efficiency is found to depress profit while profit increases output efficiency. Thirdly, environmental efficiency has a positive impact on output efficiency while there is no effect of output efficiency on environmental efficiency. Fourthly, taxes impair a firm's output efficiency. From the findings it follows that a swap of general taxes for an energy tax is likely to improve both output efficiency and energy efficiency. The latter outcome implies a win–win situation which will facilitate the further implementation and adoption of environmental policy. Finally, the paper illustrates the applicability of structural equation modeling in efficiency analysis. [ABSTRACT FROM AUTHOR]

Small towns, the nodes connecting cities and villages, play an important role in urbanization and rural development. However, it is generally believed that small towns lack economic efficiency therefore are excluded from main-stream urbanization of China. Based on the socio-economic statistics of 109 towns in 7 counties of Jiangsu province, this paper evaluates the DEA efficiency of small towns with different classifications, and compares the DEA efficiency of small towns with 21 county-towns, then analyzes the economic density of small towns and 283 prefecture-level cities with different scales. The results show that: (1) There are significant differences in the efficiency characteristics of different types of towns. Approximately 80% of the sampled towns could improve their efficiency by intensive resource-use and production scale expansion; (2) Although county-towns obtained more resources, their efficiency is not significantly superior than other types of towns (P > 0.05); (3) Small towns perform well in terms of economic density, which is not significantly different from small and medium-sized cities, but significantly lower than large cities with population of municipal district > 1 million. These findings challenge the stereotypes of towns in driving urbanization. The authors argue that the economic development level, input-output efficiency and economic density of small towns can also be high, shaping their important role in integrating urban and rural development, accelerating new-type urbanization and promoting rural vitalization strategy. • DEA was employed to evaluate the efficiency of 109 sampled small towns. • There are significant differences in the efficiency characteristics of different types of towns. • The economic density of small towns is significantly lower than that of big cities, but no significant difference with small and medium-sized cities. • More attention should be paid to incubate some key towns as growth poles of rural areas. [ABSTRACT FROM AUTHOR]