Investigating productivity change and hospital size: a nonparametric frontier approach

The study obtains measures of the productive efficiency of ‘larger’ and ‘smaller’ Northern Ireland hospitals during the 1986–92 pre-Trust period. The measures provide insights into how these hospitals were responding to the pressures for increased efficiency prior to Trust status. They also constitute a useful benchmark for evaluating productivity change under the post-1992 Trust status environment. A nonparametric frontier approach is used to measure productivity change and to decompose this into technical change (or shifts in the best practice frontier) and efficiency change (or change in how far a hospital is from the frontier). The latter change in efficiency is also decomposed into changes in scale efficiency, pure technical efficiency and input congestion. The findings indicate that smaller hospitals, starting from a less efficient base, achieved greater productivity gains than larger hospitals over 1986–92. For smaller hospitals, this was due to progressive shifts in the best practice frontier outweighing a substantial decline in efficiency. This decline was found to be due to a deterioration in scale efficiency over the period. The results overall support the current policy view that larger hospitals are more efficient than smaller hospitals in providing health care services.     

Static efficiency decompositions and capacity utilization: integrating economic and technical capacity notions

Starting from existing static decompositions of overall economic efficiency on nonparametric production and cost frontiers, this article proposes more comprehensive decompositions including several cost-based notions of capacity utilization. Furthermore, in case prices are lacking, we develop additional decompositions of overall technical efficiency integrating a technical concept of capacity utilization. These new efficiency decompositions provide a link between short and long run economic analysis and, in empirical work, avoid conflating inefficiency and differences in capacity utilization. An empirical analysis using a monthly panel of Chilean hydro-electric power plants illustrates the potential of these decomposition proposals.     

Shadow prices and pollution costs in U.S. agriculture

We use the directional output distance function to derive estimates of production inefficiency, shadow prices for polluting outputs, and the associated pollution costs. Using a quadratic functional form for the directional output distance function and data for the U.S. agricultural sector during 1960–1996, we find that the pollution costs (the shadow values) from the runoff and leaching of pesticides are 6% of crop and animal revenues and are highest in the Midwest and lowest in the Western states. If states were to reduce technical inefficiency and operate on the production frontier, pollution costs could be reduced by 7%.     

An international comparison of hospital efficiency: does institutional environment matter?

The consensus among many health economists is that no meaningful performance differences exist among for-profit and non-profit hospitals in the US, but this topic has continued to be a matter of academic, judicial, and public policy interest. A similar debate has ensued internationally, regarding the potential efficiency gains from privatization of public enterprises. In this paper, we examine empirical evidence from the public, highly regulated Norwegian hospital sector and the private, highly competitive and unregulated California hospital sector to ascertain whether institutional environment and level of market competition significantly affect the degree of productive efficiency in hospitals. We compare and discuss the productive efficiency of four similar sets of hospitals operating in different institutional and competitive environments. The four samples are carefully matched in the dimensions of sample size, hospital size, and average lengths of stay. Heterogeneity in output definition is used to control for other dimensions (casemix, age distribution of patients). We use Data Envelopment Analysis (DEA) to estimate and compare average long-run as well as short-run efficiency measures across groups. We find that scale and scope regulation of Norwegian hospitals improves long-run efficiency, primarily due to better utilization of capital.     

Sources of efficiency,productivity and output growth in Botswana agriculture

The purpose of this study is to explore reasons for the decline in agricultural performance in Botswana that has occurred during the implementation of a variety of policy measures, as well as the introduction of new technologies, and to identify ways in which it might be reversed. Panel data from six regions in Botswana (period 1979–2012) is analyzed with a stochastic output distance function and inefficiency effects model. We decompose agricultural output growth into; total factor productivity (TFP ) and changes in input use (factors of production). TFP is further decomposed into scale effects, technical efficiency and technological change. The results show that over the study period agricultural output grew at a very low rate of 0.072 percent per year, which is largely due to a growth in factors of production at 0.071 percent per year rather than TFP growth (which declined at 0.003 percent per year). We found that the decline in productivity has been due to technological regress and low growth in technical efficiency and scale efficiency. Policy options aimed at improving agricultural productivity and output growth will require the strengthening of extension services; improving the agronomic and husbandry management skills of farmers through training; and by encouraging farmers to adopt and utilize technologies that have been provided under existing policy programs.     

Analyses of technical efficiency using SDF and DEA models: evidence from Nepalese agriculture

Alleviation of poverty is a central issue in Nepal. Given the limited stock of land and the infant/unorganized manufacturing sector, increased demand for food has to be satisfied by improving production efficiency. This article examines how this could be achieved. Stochastic distance function and data envelopment analysis models identify the existence of a high degree of technical inefficiency in Nepalese agriculture, suggesting that there is a substantial prospect of increasing agricultural productivity using the existing level of inputs and resources more efficiently. Among the three farm sizes in the data set, medium size farmers achieve a higher technical efficiency than large and small farm sizes, suggesting that productive efficiency can be increased with the encouragement of creating medium size holdings. The observed decreasing returns to scale also implies that productivity gains could be achieved by breaking up of large farms into small family farms. The technical inefficiency model suggests the potential for shifting the production frontier upwards by providing ownership of land, increasing farmers’ education and knowledge, and increasing land quality, including irrigation facilities.     

Measuring sustainability performance for China: A sequential generalized directional distance function approach

This paper aims to present certain composite sustainability efficiency indicators for China based on a sequential generalized directional distance function. This approach can measure the sustainability performance of a country with diverse outputs, nature of technologies, and non-radial slacks. First, we propose the concept of a generalized directional distance function under a sequential environmental production technology. Second, we develop several standardized composite indicators related to sustainability performance. We then estimate the sequential generalized directional distance function based on a series of sequential data envelopment analysis models. Finally, we empirically examine regions in China using the proposed model and present some implications based on the empirical results.     

Time substitution for environmental performance: The case of Swedish manufacturing

We extend recent advances in time substitution modeling to a directional distance function framework, in order to examine the environmental performance of firms in Sweden’s pulp and paper industry for the years 2002–2008. Our data allow us to estimate the optimal reallocation of environmental investments, expenditures and energy use to simultaneously maximize production output and minimize emissions in the years immediately before and after the implementation of the European Union Emissions Trading Scheme. We find some evidence of overall productivity decline when considering both emissions and output objectives, due primarily to technological decline, and that cumulative dynamic inefficiency outweighs static inefficiency. A comparison of optimal investment with observed investment indicates that firms could have improved their performance by reallocating environmental investments to early periods and production-oriented investment to later periods.     

The effect of risk-based capital requirements on profit efficiency in banking

The purpose of this paper is twofold: to show how to measure profit efficiency in banking using a newly developed technique, and to use that technique to determine the effect of risk-based capital requirements on the profit performance of US banks. The measure of profit efficiency used captures deviations from profit maximization arising from technical inefficiency, caused by a lack of managerial oversight and allocative inefficiency, which is caused by managers choosing a nonoptimal mix of inputs and outputs. A leverage ratio constraint and a risk-weighted capital ratio constraint are explicitly included in the model, which allows identification of the effect on profits of those constraints. The techniques are applied to random samples of US banks for 1990, 1992, and 1994. The results indicate that allocative inefficiency is a larger source of profit loss than technical inefficiency and that the risk-based capital standards have a significant effect on bank allocative efficiency.     

Specification and estimation of stochastic multiple-output production and technical inefficiency

This paper presents a primal-based approach for specification and estimation of multiple-output production frontiers that allows simultaneous identification and estimation of determinants of technical inefficiency. The proposed model extends the technical efficiency effects model by Battese and Coelli (1995) to general multiple-output technologies. An empirical application using Swedish health care panel data from the years 1989–1994 is included. The key issue is to test for the effects on technical efficiency of an organizational reform implemented with the primary purpose to increase efficiency. The results reveal no significant effect on technical efficiency of the reform, but evidence of overall decreased technical efficiency and technical progress in the provision of health care over the studied time period are found.     

国有商业银行与股份制商业银行生产效率的比较研究

本文采用基于投入的DEA方法 ,比较了加入WTO之前我国国有商业银行与股份制商业银行的生产效率。我们把存款当作产出 ,选取 1999年～ 2 0 0 1年十四家全国性商业银行为样本 ,计算出银行的技术效率 ,并将技术效率分解为纯技术效率和规模效率 ,确定银行的规模报酬变化。我们从银行的技术有效性、整体效率、技术无效性原因和规模报酬四个方面对国有和股份制商业银行进行了比较分析 ,研究国有商业银行与股份制商业银行之间的差距 ,并分析了原因。     

Evolution of banking efficiency within an unstable macroeconomic environment: the case of Turkish commercial banks

This paper analyses the efficiency performance of the Turkish banking sector between 1988 and 1999, a period characterized by increasing macroeconomic instability. The technical and scale efficiencies of Turkish commercial banks are measured with the use of nonparametric Data Envelopment Analysis. The empirical results suggest that over the sample period both pure technical and scale efficiency measures show a great variation and the sector did not achieve sustained efficiency gains. It is also reported that the sector suffers mainly from scale inefficiency and scale inefficiency, in turn, is due to decreasing returns to scale. There are also reported differences in the efficiency performance of commercial banks with different ownership status. In addition, the relationships between profitability, asset quality, size and the two definitions of efficiency are considered. Efficient banks are more profitable, and pure technical efficiency and scale inefficiency are positively related to size. The trend in the performance levels over the period suggests that macroeconomic conditions had a profound influence on the efficiency measures.     

The productivity of French technology transfer offices after government reforms

This article assesses the productivity change of the French technology transfer offices (TTOs) after the introduction of the July 1999 innovation law and the new public management oriented reform. By using Data Envelopment Analysis (DEA)-based Malmquist productivity index, we find an average increase in the short-term productivity of the French TTOs driven by both positive efficiency and technology change. The bootstrap analysis reveals that these improvements are ascribed to 50% of the TTO systems, while the remaining part does not show significant changes. Moreover, while older TTOs positively contribute to the performance of French TTOs in the short run, young TTOs with hospital seem to contribute negatively to the efficiency of the entire system.     

On the (in)efficiency of Swiss hospitals

The efficiency of hospitals is of interest to health insurers, government authorities and hospital management itself. However, econometric methods for determining (in)efficiency have severe drawbacks since hospitals are multiproduct firms and because the duality between production and cost functions cannot be assumed. In this work, non-parametric, deterministic data envelopment analysis (DEA) is used to measure the relative inefficiency of 89 Swiss hospitals covering the years 1993–1996 (310 observations). Special attention is given to the role of patient days in the production of health. The findings depend on whether patient days are viewed as an input of patient time or as an output, as in previous studies. While the probability of a unit being inefficient cannot be explained using the available data, the degree of overall inefficiency is shown to significantly depend on the financial incentives faced by management, in particular due to subsidization. Private hospitals do not seem to be less inefficient than public ones; however, this may be caused by their ‘overusing’ inputs that in fact are valued as amenities by patients. This consideration points to an important limitation in applying the purely quantitative criteria of DEA to hospitals.     

Measuring and explaining the efficiencies of the United Arab Emirates banking system

Using newly collected data from a survey distributed to all banks in the United Arab Emirates (UAE), this article measures economic efficiency in the banking industry, namely allocative, technical, pure technical and scale efficiency. Employing a nonparametric Data Envelopment Analysis (DEA) approach, the study estimates the efficiency for a cross section of the UAE banks in 2004. The results indicate that the dominant source of inefficiency in the UAE banking is stemming from allocative inefficiency rather than technical inefficiency. Furthermore, the main source of the relatively small size, technical inefficiency in the UAE banking industry is not the scale inefficiency but rather pure technical inefficiency. The results further indicate that the UAE banks are able to use their input resources more efficiently when they have more branches, and that newer banks are performing better than older banks on average. Moreover, the results also show that short experiences of employees affect efficiencies negatively and government ownership tends to reduce efficiency (as the government shares increase in the bank, the efficiency scores get lower). Finally, the most interesting results have to do with finding higher average efficiencies in banks that employ more women, more managers and less national citizens of the UAE.     

Technical and scale efficiencies of meat goat farms in the USA

This study determines i) scale and technical efficiencies, ii) marginal productive contributions for inputs and outputs and iii) efficiency drivers of meat goat farms in the USA. We estimate an input distance function (IDF) using a stochastic production frontier (SPF) technique. The average technical efficiency (TE) for the USA meat goat whole farm was 0.74. The operator education level, percentage of annual net farm income from the goat operation, regional differences and holding of an off farm job are the efficiency drivers of USA meat goat farms. We find increasing returns to scale (RTS) for USA meat goat farms. Our results suggest that USA meat goat farms can be scale efficient if their optimal size of operation is greater than approximately 64 goats or greater than 40 breeding does. Empirical Monte Carlo (MC) simulation techniques show the consistency of finite-sample properties for the input distance function.     

Slack-based directional distance function in the presence of bad outputs: theory and application to Vietnamese banking

In this paper we extend the slack-based directional distance function introduced by Färe and Grosskopf (Eur J Oper Res 200(1):320–322, 2010) to measure efficiency in the presence of bad outputs and illustrate it through an application on data of Vietnamese commercial banks. We also compare results from the slack-based directional distance function relative to the directional distance function, the enhanced hyperbolic efficiency measure (Färe et al. in Rev Econ Stat 71(1):90–98, 1989) and the Farrell-type technical efficiency and confirm that it has greater discriminative power.     

A ‘technically level playing-field’ profit efficiency analysis of enforced competition between publicly funded institutions

The study demonstrates how recent advances in the data envelopment analysis (DEA) of profit efficiency, and in combining DEA and stochastic frontier analysis (SFA) to measure producer performance, can be used to obtain a ‘technically level playing-field’ profit efficiency performance measure. A three-stage analysis is used to provide an empirical investigation of public-sector universities facing regulatory pressures to attain both profit efficiency and output quality. Stage one employs directional distance function analysis to decompose DEA profit efficiency measures into technical and allocative components. As these performance measures incorporate the impacts of managerial inefficiency, the operating environment and luck (statistical noise), stage two applies SFA to total (radial and non-radial) slacks to obtain a degree of disentanglement from the latter two impacts. The stage-two results are used to define a common environment and common luck scenario, thus permitting university producers’ inputs to be adjusted so as to reflect operation within this more level playing-field scenario. Stage three recomputes the first-stage DEA for this scenario, to yield an (input-focused) ‘technically level playing-field’ measure of profit efficiency that unifies the regulatory financial audit and output-quality indicators in a single, best-practice-benchmarked, performance measure.     

Measuring inefficiency in the presence of bad outputs: Does the disposability assumption matter?

Multiple approaches to incorporate environmental pollution in production technologies have been proposed. In this paper, we analyze the consequences of these theoretical models for applied research. Our comparison focuses on alternative disposability assumptions imposed on bad outputs and their effects on the measurement of productive efficiency. Using empirical data on electricity generation in the US, we quantify and analyze differences among the theoretical models. Moreover, Monte Carlo simulations are conducted to evaluate the ability of the models to correctly estimate inefficiency given varying specifications of the pollution-generating process.     

Off-farm labour and the structure of US agriculture: the case of corn/soybean farms

While the growing importance of off-farm earnings suggests large benefits accrue to farmers from efforts to expand off-farm income opportunities, economic well being also depends on greater efficiency. To comprehensively gauge the economic health of farm operator households' off-farm income is interpreted as an output along with corn, soybeans, livestock and other crops. To accomplish this task two related methodologies were used. First, using 2000 data, a multi-activity cost function was set up to analyse labour allocation decisions within the farm operator household and also to estimate returns to scale and scope. Second, using 1996–2000 data, an input distance function approach was followed to estimate returns to scale, cost economies and technical efficiency – and the relative performance of farm operator households with and without off-farm wages and salaries compared. The cost function and input distance function results both suggest that off-farm outputs and inputs can be modelled in a multi-activity framework and involve significant economies of scope.