Showing papers on "Data envelopment analysis published in 1997"

An Introduction to Efficiency and Productivity Analysis

Abstract: The second edition of An Introduction to Efficiency and Productivity Analysis is designed to be a general introduction for those who wish to study efficiency and productivity analysis. The book provides an accessible, well-written introduction to the four principal methods involved: econometric estimation of average response models; index numbers, data envelopment analysis (DEA); and stochastic frontier analysis (SFA). For each method, a detailed introduction to the basic concepts is presented, numerical examples are provided, and some of the more important extensions to the basic methods are discussed. Of special interest is the systematic use of detailed empirical applications using real-world data throughout the book. In recent years, there have been a number of excellent advance-level books published on performance measurement. This book, however, is the first systematic survey of performance measurement with the express purpose of introducing the field to a wide audience of students, researchers, and practitioners. Indeed, the 2nd Edition maintains its uniqueness: (1) It is a well-written introduction to the field. (2) It outlines, discusses and compares the four principal methods for efficiency and productivity analysis in a well-motivated presentation. (3) It provides detailed advice on computer programs that can be used to implement these performance measurement methods. The book contains computer instructions and output listings for the SHAZAM, LIMDEP, TFPIP, DEAP and FRONTIER computer programs. More extensive listings of data and computer instruction files are available on the book's website: (www.uq.edu.au/economics/cepa/crob2005).

A Slacks Based Measure of Efficiency in Data Envelopment Analysis

Abstract: In this paper, we will propose a Slacks-Based measure (SBM) of efficiency in DEA. This scalar measure deals directly with the input surplus and the output shortage of the decision making unit (DMU) concerned. It is unit invariant and monotone decreasing with respect to input surplus and output shortage. Furthermore, this measure is decided only by consulting with the reference set of the DMU and is not affected by statistics over the whole data set. The new measure has a close connection with other measures proposed so far, e.g., CCR and BCC. The dual side of this model can be interpreted as profit maximization, in contrast to the ratio maximization of the CCR model. Numerical experiments show its validity as an efficiency measurement tool and its compatibility with other measures of efficiency.

Weights restrictions and value judgements in Data Envelopment Analysis: Evolution, development and future directions

Abstract: This paper provides a review of the evolution, development and future research directions on the use of weights restrictions and value judgements in Data Envelopment Analysis. The paper argues that the incorporation of value judgements in DEA was motivated by applications of the method in real life organisations. The application driven development of the methods has led to a number of different approaches in the literature which have inevitably different uses and interpretations. The paper concentrates on the implications of weights restrictions on the efficiency, targets and peer comparators of inefficient Decision Making Units. The paper concludes with future research directions in the area of value judgements and weights restrictions.

Developing measures of airport productivity and performance: an application of data envelopment analysis

Abstract: Many studies have investigated the financial results and economic productivity of airlines but few have investigated the productivity or performance of airports, and how changes in the industry may have affected them. Most airports measure performance strictly in accounting terms by looking at only total costs and revenues and the resulting surpluses or deficits. Few utilize any type of productivity measure or performance indicator. This paper applies Data Envelopment Analysis to assess the performance of airports. It is used to construct performance indices on the basis of the multiple outputs which airports produce and the multiple inputs which they utilize. In particular we develop productivity measures for terminals and airside operations. The performance measures are then used in a second stage Tobit regression in which environmental, structural and managerial variables are included. The regression results provide a ‘net’ performance index and also identify which variables the managers have some control over and what the relative importance of each variable is in affecting performance. The data set contains a panel of 21 U.S. airports over a five-year period.

Evaluating the cost-efficiency of the Italian banking system: What can be learned from the joint application of parametric and non-parametric techniques

Abstract: Research on bank efficiency has developed in two separate streams: econometric studies and Data Envelopment Analysis, a linear programming technique. These two branches of literature have developed quickly, but separately; in this paper these two approaches have been tested on a common panel of 270 Italian banks, and this has suggested the following: (i) econometric and linear programming results do not differ dramatically, when based on the same data and conceptual framework; (ii) when differences arise, they can be explained by going back to the intrinsic features of the models. Moreover, some findings on Italian banks may be of interest also to the international reader: (i) efficiency scores show a high variance; (ii) the banking system is split in two, between northern and southern banks; (iii) there is a direct (rather than inverse) relationship between productive efficiency and asset quality; (iv) the efficiency of Italian banks did not increase over the period 1988–1992.

Functional Forms of Stochastic Frontier Production Functions and Models for Technical Inefficiency Effects: A Comparative Study for Wheat Farmers in Pakistan

Abstract: This paper considers translog and Cobb-Douglas stochastic frontiers in which the technical inefficiency effects are defined by three different models. The models involved are the time-varying inefficiency model, proposed by Battese and Coelli (1992), the inefficiency effects model for panel data, proposed by Battese and Coelli (1995), and the non-neutral frontier model, proposed by Huang and Liu (1994). Technical change is also accounted for in the frontier models. Predicted technical efficiencies of the wheat farmers and estimates of the elasticities of wheat production with respect to the different inputs and the returns-to-scale parameter are compared under the different model specifications.

Assessing the Comparative Efficiency of Higher Education Institutions in the UK by the Means of Data Envelopment Analysis

Abstract: In this paper, we examine the comparative of higher education institutions in the UK. The governmental inititatives of the decade within this sector have given emphasis to issues of accountability, value for money and cost control. The reporting of various statistics regarding the universities' activities only fully achieves its potential value if it is used to define comprehensive concepts of performance and goal achievements informed by the institutions' missions. In that spirit, we propose concepts of cost and outcome efficiency in order to gain further insights into the universities' operations. Data envelopment analysis and its recent advances were used to asses the two types of efficiency. The application of the methodology to 45 universities in the UK revealed a subset of six institutions that showed satisfactory performance across alternative efficiency tests.

Use of Data Envelopment Analysis in assessing Information Technology impact on firm performance

Abstract: The purpose of this paper is to consider the effect of Information Technology on the performance of a firm We use Data Envelopment Analysis (DEA) to study this problem In the paper, we outline DEA and address its advantages over parametric approaches We then develop a methodology to identify the efficiency of IT utilization and the importance of IT-related activities and their effect on firm performance, within the DEA framework Our methodology also evaluates the marginal benefits of IT We provide an application of our methodology through an illustration

On the Role of Weight Restrictions in Data Envelopment Analysis

Abstract: This paper examines the role that weight restrictions play in Data Envelopment Analysis (DEA). It is argued that the decision to include a factor (input or output) in a DEA model represents an implicit judgement that the factor has a non-trivial weight. It therefore seems perverse to allow DEA to assign a trivial weight to that factor in assessing the efficiency of a unit. There is therefore a strong case for imposing restrictions on factor weights. However, many existing methods of weight restriction are in practice unwieldy. This paper proposes an alternative approach we term contingent weight restriction which is both practical and intellectually consistent with the DEA philosophy. The paper explores the implications of alternative methods of weight restriction using simulated data from a well known production process.

Model misspecification in Data Envelopment Analysis

Abstract: The use of Data Envelopment Analysis for estimating comparative efficiency has become widespread, and there has been considerable academic attention paid to the development of variants of the basic DEA model. However, one of the principal weaknesses of DEA is that - unlike statistically based methods - it yields no diagnostics to help the user determine whether or not the chosen model is appropriate. In particular, the choice of inputs and out-puts depends solely on the judgement of the user. The purpose of this paper is to examine the implications for efficiency scores of using a misspecified model. A simple production process is set up. Simulation models are then used to explore the effects of applying misspecified DEA models to this process. The phenomena investigated are: the omission of significant variables; the inclusion of irrelevant variables; and the adoption of an inappropriate variable returns to scale assumption. The robustness of the results is investigated in relation to sample size; variations in the number of inputs; correlation between inputs; and variations in the importance of inputs. The paper concludes that the dangers of misspecification are most serious when simple models are used and sample sizes are small. In such circumstances, it is concluded that it will usually be to the modeller's advantage to err on the side of including possibly irrelevant variables rather than run the risk of excluding a potentially important variable from the model.

The use of data envelopment analysis to monitor hotel productivity

Abstract: Data envelopment analysis (DEA) was used to monitor and benchmark productivity in a chain of 15 hotels over a 12-month period. Quarter results were compared with each other and with standard accounting data for the same period. In this way it was possible to identify and study units which showed anomalous behavour in terms of their measured productivity and gross profit. These were apparently related to factors other than size or staffing levels. Advantages and disadvantages of DEA are discussed, as well as its potential for the motivation and appraisal of local management and for optimizing budgetary control. © 1997 John Wiley & Sons, Ltd.

Pitfalls of normal-gamma stochastic frontier models

Abstract: Although conceptually pleasing, normal-gamma frontier models lead to difficult estimation problems. It is shown here that unless the sample size reaches several thousands of observations the shape parameter of the gamma density is hard to estimate, and that this carries over to estimates of the stochastic frontier, the individual inefficiencies, and the allocation of the overall variance to the stochastic frontier and to the inefficiencies.

Productivity of cities

Abstract: Using Data Envelopment Analysis methods, this study measures the technical efficiency of the 50 largest Korean cities to provide information on the relative performance of each city , sources of inefficiency in urban production, and possible returns to scale of additional investment for each city. It also seeks to determine the factors that account for productivity differentials, and by using the Data Envelopment Analysis methodology, hopes to close the gap between theory and empirical estimates in urban-regional studies, and contribute to improvements in urban-regional policy making.

Data envelopment analysis and university selection

Abstract: This paper is concerned with the process of performance measurement undertaken by different stakeholders in the UK higher education sector, focusing on the perspective of the potential student. The...

Measuring production efficiency of acute hospitals in Scotland, 1991-94: validity issues in data envelopment analysis

Abstract: Data Envelopment Analysis is a potentially useful technique for measuring production efficiency and is being increasingly applied to health care services, as with other areas. However, some fundamental concerns need to be addressed before Data Envelopment Analysis can be accepted widely as a routine tool. These include issues of validity and specification error. This paper suggests a broad framework for assessing validity, which should be developed further, and gives illustrative examples of the problems in a real application within health care. Data from 75 Scottish acute hospitals for three years from 1991–94 are analysed. Internal validity is assessed by examining the effect on the results obtained of the choice of inputs and outputs selected for analysis. External validity is assessed by examining differences in the results obtained from the data for each of the three years. In both cases, it is concluded that there is a disturbing lack of concordance between the different results obtained. Caution mu...

Measuring Public Sector Efficiency: A Study of Economics Departments at Australian Universities

Abstract: The 1987 Green Paper on Australian higher education included a recommendation for the abandonment of the binary system. The Dawkins plan effectively transferred resources from established universities to the former colleges of advanced education. This study compares the initial and subsequent performance of economics departments. The analysis applies survey data to a non-parametric data envelopment analysis model. Model results suggest that while overall performance has improved substantially, further productivity improvements are required for new universities to achieve best practice.

Productive Efficiency of the Swine Industry in Hawaii: Stochastic Frontier vs. Data Envelopment Analysis

Abstract: Improving productive efficiency is an increasingly important determinant of the future of the swine industry in Hawaii. This paper examines the productive efficiency of a sample of swine producers in Hawaii by estimating a stochastic frontier production function and the constant returns to scale (CRS) and variable returns to scale (VRS) output-oriented DEA models. The technical efficiency estimates obtained from the two frontier techniques are compared. The scale properties are also examined under the two approaches. The industry's potential for increasing production through improved efficiency is also discussed.

An internal customer service quality data envelopment analysis model for bank branches

Abstract: Over the last few years data envelopment analysis (DEA) has been gaining increasing popularity as a performance assessment methodology. DEA has been successfully applied to bank branch performance evaluation. However, most DEA models which have been developed for bank branch performance assessment do not include service quality as an output. Service quality has been considered by many as the key to gaining competitive advantage and customer loyalty. Develops a DEA model that can be used to provide direction for improvement to branches which do not use their resources in the most efficient way to produce service quality. Focuses on internal customer service quality which is sometimes easier to measure. Presents results from an empirical study undertaken at a bank to demonstrate the applicability of the model.

Evaluating public transport efficiency with neural network models

Abstract: This paper is concerned with measuring performance of public transport services based on the concept of productive efficiency. A new nonparametric approach is proposed based on multi-layer perceptron neural networks (MLPs). The advantages and limitations of this approach are discussed and compared with those of mathematical programming and econometric techniques. The MLP is used, along with data envelopment analysis (DEA) and corrected least squares (COLS), to set out comparative annual efficiency measures for the London Underground, for the period 1970 to 1994. It is argued that the MLP approach is superior to traditionally applied techniques since it is both nonparametric and stochastic and offers greater flexibility. Finally, it is demonstrated that the proposed MLP efficiency analysis has important practical implications for decision making.

DEA-based yardstick competition: The optimality of best practice regulation

Abstract: In this paper, we introduce the notion of "best practice" or "minimal extrapolation" regulation, and we show that cost reimbursement based on best practice norms may be (second best) optimal when the regulated firms have superior technological information and make non-verifiable cost reductions. In particular, we investigate the use of Data Envelopment Analysis (DEA) in regulatory environments with considerable technological uncertainty. A series of DEA models, including the crs, drs, vrs, fdh and frh models, are considered, and it is shown that schemes which reimburse actual costs plus a fraction of DEA estimated cost reductions will (1) induce the firms to minimize costs and (2) minimize the informational rents of the firms.

Managerial Efficiency, Managerial Succession and Organizational Performance

Abstract: Data envelopment analysis (DEA) is used to create a measure of managerial efficiency in an attempt to reassess the conflicting theories concerning the impact of organizational performance on manager succession, and the counter-theories concerning the impact of manager succession on organizational performance. The analysis uses data for 147 college basketball teams from 1984 to 1991. The results indicate that winning, not efficiency, is the key criterion used in determining managerial retention. Yet when managers of losing teams are dismissed the teams tend to do even worse. If, however, the efficiency of the new manager is greater than that of the former, the disruptive effect of succession is minimized. Because administrators appear to focus on winning, not efficiency, they will often select new managers who are less efficient than departed managers. These results are unique to this literature and indicate promise for the use of DEA in analyses of the internal efficiencies of organizations. © 1997 John Wiley & Sons, Ltd.