The Cost of Strikes in the Spanish Mining Sector : Modelling an Undesirable Input With a Distance Function

In this paper, we use the input distance function to incorporate strikes, modelled as bad inputs, that affect the production process but which do not have a market price. This is a new application of a well-known concept from the production economics tool kit, although it should be noted that distance functions have been previously used to obtain shadow prices for non-desirable outputs.This method has two advantages. First, it allows us to obtain certain prices or shadow costs, which is especially useful when markets do not exist for the factors. Second, it is not necessary to assume that the firm minimizes costs nor that the input prices are exogenous. These characteristics make the input distance function an appropriate tool in certain case studies