Projections Onto Efficient Frontiers: Theoretical and Computational Extensions to DEA

Data Envelopment Analysis (DEA) has been widely studied in the literature since its inception in 1978. The methodology behind the classical DEA, the oriented method, is to hold inputs (outputs) constant and to determine how much of an improvement in the output (input) dimensions is necessary in order to become efficient. This paper extends this methodology in two substantive ways. First, a method is developed that determines the least-norm projection from an inefficient DMU to the efficient frontier in both the input and output space simultaneously, and second, introduces the notion of the observable frontier and its subsequent projection. The observable frontier is the portion of the frontier that has been experienced by other DMUs (or convex combinations of such) and thus, the projection onto this portion of the frontier guarantees a recommendation that has already been demonstrated by an existing DMU or a convex combination of existing DMUs. A numerical example is used to illustrate the importance of these two methodological extensions.     

Dual Representations of Non-Parametric Technologies and Measurement of Technical Efficiency

This paper extends the recent work by Frei and Harker on projections onto efficient frontiers (1999) in three ways. First, we provide a formal definition of the production set as the intersection of a finite number of closed halfspaces. We emphasize the necessity of a complete enumeration of the supporting hyperplanes to define the production set properly. We focus on the problem of exhaustive enumeration of the supporting hyperplanes to characterize the production set. Second, we consider the problem of an arbitrary-norm projection on the boundary of the production set. We use the concept of the Hölder distance function and we derive the necessary mathematics to calculate distances and projections of inefficient DMUs onto the efficient frontier. Third, we introduce a relevant weighting scheme for inputs and outputs so that the Hölder distance function respects the commensurability axiom defined by Russell (1988). Finally, we present an illustration using the same data set as Frei and Harker (1999) to highlight some of the extensions proposed in the paper.     

Application of evidential reasoning approach and OWA operator weights in road safety evaluation considering the best and worst practice frontiers

Data envelopment analysis (DEA) has recently become relatively popular with road safety experts. Therefore, various decision-making units (DMUs), such as EU countries, have been assessed in terms of road safety performance (RSP). However, the DEA has been criticized because it evaluates DMUs based only on the concept of self-assessment, and, therefore does not provide a unique ranking for DMUs. Therefore, cross efficiency method (CEM) was developed to overcome this shortcoming. Peer-evaluations in addition to self-evaluation have made the CEM to be recognized as an effective method for ranking DMUs. The traditional CEM is based only on the standard CCR (Charnes, Cooper and Rhodes) model, and it evaluates DMUs according to their position relative to the best practice frontier while neglecting the worst practice frontier. However, the DMUs can also be assessed based on their position relative to the worst practice frontier. In this regard, the present study aims to provide a double-frontier CEM for assessing RSP by taking into account the best and worst frontiers simultaneously. For this purpose, the cross efficiency and cross anti-efficiency matrices are generated.Even though a weighted average method (WAM) is most frequently used for cross efficiency aggregation, the decision maker's (DM) preference structure may not be reflected. For this reason, the present study mainly focuses on the evidential reasoning approach (ERA), as a nonlinear aggregation method, rather than the linear WAM. Equal weights are often used for cross efficiency aggregation; consequently, the effect of the DM's subjective judgments in obtaining the overall efficiency is ignored. In this respect, the minimax entropy approach (MEA) and the maximum disparity approach (MMDA) are applied for determining the ordered weighted averaging (OWA) operator weights for cross efficiency aggregation. The weighted cross efficiencies and cross anti-efficiencies are then aggregated using the ERA. Finally, the proposed method, called DF-CEM-ERA, is used to evaluate the RSP of EU countries as well as Serbian police departments (PDs).     

A Simulation Study of Joint Uses of Data Envelopment Analysis and Statistical Regressions for Production Function Estimation and Efficiency Evaluation

A previous paper by Arnold, Bardhan, Cooper and Kumbhakar (1996) introduced a very simple method to estimate a production frontier by proceeding in two stages as follows: Data Envelopment Analysis (DEA) is used in the first stage to identify efficient and inefficient decision-making units (DMUs). In the second stage the thus identified DMUs are incorporated as dummy variables in OLS (ordinary least squares) regressions. This gave very satisfactory results for both the efficient and inefficient DMUs. Here a simulation study provides additional evidence. Using this same two-stage approach with Cobb-Douglas and CES (constant elasticity-of-substitution) production functions, the estimated values for the coefficients associated with efficient DMUs are found to be not significantly different from the true parameter values for the (known) production functions whereas the parameter estimates for the inefficient DMUs are significantly different. A separate section of the present paper is devoted to explanations of these results. Other sections describe methods for estimating input-specific inefficiencies from the first stage use of DEA in the two-stage approaches. A concluding section provides further directions for research and use.     

The benefits of non-radial vs. radial super-efficiency DEA: an application to burden-sharing amongst NATO member nations

Using radial super-efficiency data envelopment analysis (DEA) has improved the discriminating performance across efficient decision-making units (DMUs). This paper extends the super-efficiency approach to a non-radial super-efficiency DEA (NRSE-DEA) index. NRSE-DEA is shown to be invariant to units of input (output) measurement. NRSE-DEA is illustrated here via an application to NATO burden-sharing assessment in which the DMUs are the member nations of NATO. The NRSE-DEA provides additional insights into the ranking of efficient countries, suggesting which are absorbing a particularly large share of NATO responsibilities. The NRSE-DEA generates a smaller set of efficient DMUs. This, in turn, provides more discriminatory power, a more accurate measure of super-efficiency, a more meaningful ranking of the efficient burden sharing countries, and a more reliable assessment of contributions by NATO members, amongst other policy issues.     

Centralized Resource Allocation Using Data Envelopment Analysis

While conventional DEA models set targets separately for each DMU, in this paper we consider that there is a centralized decision maker (DM) who “owns” or supervises all the operating units. In such intraorganizational scenario the DM has an interest in maximizing the efficiency of individual units at the same time that total input consumption is minimized or total output production is maximized. Two new DEA models are presented for such resource allocation. One type of model seeks radial reductions of the total consumption of every input while the other type seeks separate reductions for each input according to a preference structure. In both cases, total output production is guaranteed not to decrease. The two key features of the proposed models are their simplicity and the fact that both of them project all DMUs onto the efficient frontier. The dual formulation shows that optimizing total input consumption and output production is equivalent to finding weights that maximize the relative efficiency of a virtual DMU with average inputs and outputs. A graphical interpretation as well as numerical results of the proposed models are presented.     

A cautionary note on methods of comparing programmatic efficiency between two or more groups of DMUs in data envelopment analysis

In some applications of data envelopment analysis (DEA) there may be doubt as to whether all the DMUs form a single group with a common efficiency distribution. The Mann–Whitney rank statistic has been used to evaluate if two groups of DMUs come from a common efficiency distribution under the assumption of them sharing a common frontier and to test if the two groups have a common frontier. These procedures have subsequently been extended using the Kruskal–Wallis rank statistic to consider more than two groups. This technical note identifies problems with the second of these applications of both the Mann–Whitney and Kruskal–Wallis rank statistics. It also considers possible alternative methods of testing if groups have a common frontier, and the difficulties of disaggregating managerial and programmatic efficiency within a non-parametric framework.      

Adjusting MV-efficient portfolio frontier bias for skewed and non-mesokurtic returns

This study investigates the bias adjustment for mean–variance efficient portfolio frontiers due to population mean and variance estimation error in Taiwan stock market. Although Siegel and Woodgate (2007; Management Science, 53, 1005–1015) and Kan and Smith (2008; Management Science, 54, 1364–1380) suggested two portfolio frontiers that improved upon the out-of-sample performance of a traditional sample portfolio frontier. However, this study shows that, using the copula function and Gram-Charlier series, the two frontiers are theoretically biased toward the actual frontier unless returns behave normally, and the bias is related to the return skewness and kurtosis. Indeed, the two frontiers are empirically biased to the lower-left side of the actual ones, because the Taiwan stock returns are right-skewed and highly leptokurtic. Thus, this study thus proposes revised portfolio frontiers that are closer to the actual frontier than unrevised ones. This improvement may enhance the estimation accuracy of the capital market line, and hence this study can provide an effective investment reference.     

Robustness and inference in nonparametric partial frontier modeling

A major aim in recent nonparametric frontier modeling is to estimate a partial frontier well inside the sample of production units but near the optimal boundary. Two concepts of partial boundaries of the production set have been proposed: an expected maximum output frontier of order m=1,2,… and a conditional quantile-type frontier of order α∈]0,1]. In this paper, we answer the important question of how the two families are linked. For each m, we specify the order α for which both partial production frontiers can be compared. We show that even one perturbation in data is sufficient for breakdown of the nonparametric order-m frontiers, whereas the global robustness of the order-α frontiers attains a higher breakdown value. Nevertheless, once the α frontiers break down, they become less resistant to outliers than the order-m frontiers. Moreover, the m frontiers have the advantage to be statistically more efficient. Based on these findings, we suggest a methodology for identifying outlying data points. We establish some asymptotic results, contributing to important gaps in the literature. The theoretical findings are illustrated via simulations and real data.     

Marginal Rates and Elasticities of Substitution with Additive Models in DEA

Marginal rates and elasticities of substitution are derived from the optimal slack values obtained from modified versions of additive DEA models. Projection formulas are used to ensure that all points are on the efficient frontier as required for conformance with assumptions in micro-economics. The models used differ from standard versions in that slack values are allowed to be negative as well as positive in these additive models. This makes movement possible on efficiency frontiers, where improvement in some inputs or outputs requires worsening other inputs or outputs. A new definition is therefore introduced in which efficiency is attained only if the value of the worsenings is exactly offset by the value of the improvements. This includes, but is not restricted to, the case in which all slacks must be zero for full attainment of efficiency—as in standard versions of additive models.     

Maximum likelihood estimation of monotone and concave production frontiers

In this paper we bring together the previously separate parametric and nonparametric approaches to production frontier estimation by developing composed error models for maximum likelihood estimation from nonparametrically specified classes of frontiers. This approach avoids the untestable restrictions of parametric functional forms and also provides a statistical foundation for nonparametric frontier estimation. We first examine the single output setting and then extend our formulation to the multiple output setting. The key step in developing the estimation problems is to identify operational constraint sets to ensure estimation from the desired class of frontiers. We also suggest algorithms for solving the resulting constrained likelihood function optimization problems.The refereeing process of this paper was handled through R. Robert Russell. Helpful comments from Bob Russell and two anonymous referees are gratefully acknowedged. We are, of course, solely responsible for any remaining errors or omissions.     

Proposing effective strategies for meeting an environmental regulation with attainable technology improvement targets

The Japanese government will adopt the CAFE standard after 2020. By using a “modified” slacks-based measure (SBM) model, this study analyzed the technical efficiency of 113 gasoline vehicle models (GVs) and 54 hybrid vehicle models (HVs) sold by Japanese manufacturers in 2016. We also estimated attainable fuel efficiency of specific vehicle models that can be further improved referring to the nearest point on the best practice frontier. The improved CAFE values and standards of the nine automobile manufacturers were calculated. The technology gap from the vehicle technology frontier was more noticeable among gasoline vehicles than among hybrids. Moreover, most automobile manufacturers can achieve the CAFE standard through an effective achievement strategy based on best practice technologies, whereas the others will not achieve the CAFE standard even given a rapid technology innovation beyond the best practice frontiers for GVs and HVs.     

Visualizing Efficiency and Reference Relations in Data Envelopment Analysis with an Application to the Branches of a German Bank

The interest in Data Envelopment Analysis (DEA) as a method for analyzing the productivity of homogeneous Decision Making Units (DMUs) has significantly increased in recent years. One of the main goals of DEA is to measure for each DMU its production efficiency relative to the other DMUs under analysis. Apart from a relative efficiency score, DEA also provides reference DMUs for inefficient DMUs. An inefficient DMU has, in general, more than one reference DMU, and an efficient DMU may be a reference unit for a large number of inefficient DMUs. These reference and efficiency relations describe a net which connects efficient and inefficient DMUs. We visualize this net by applying Sammons mapping. Such a visualization provides a very compact representation of the respective reference and efficiency relations and it helps to identify for an inefficient DMU efficient DMUs respectively DMUs with a high efficiency score which have a similar structure and can therefore be used as models. Furthermore, it can also be applied to visualize potential outliers in a very efficient way.JEL Classification: C14, C61, D24, M2     

Semiparametric efficient estimation of dynamic panel data models

This paper extends the semiparametric efficient treatment of panel data models pursued by Park and Simar [Park, B.U., Simar, L., 1994. Efficient semiparametric estimation in stochastic frontier models. Journal of the American Statistical Association 89, 929–936] and Park et al. [Park, B.U., Sickles, R.C., Simar, L., 1998. Stochastic frontiers: a semiparametric approach. Journal of Econometrics 84, 273–301; Park, B.U., Sickles, R.C., Simar, L., 2003. Semiparametric efficient estimation of AR(1) panel data models. Journal of Econometrics 117, 279–309] to a dynamic panel setting. We develop a semiparametric efficient estimator under minimal assumptions when the panel model contains a lagged dependent variable. We apply this new estimator to analyze the structure of demand between city pairs for selected U.S. airlines during the period 1979 I–1992 IV.     

试论当代会计理论前沿

社会上有以各种形式反映各行各业的“前沿”。会计理论前沿是指会计理论发展至今在一定范围内处于最前面水平的会计理论问题。会计理论前沿与会计理论的难点、热点存在着内在的联系。根据一定标准选择需要继续研究的会计理论前沿问题。按照要求组织会计理论前沿问题的研究。     

Research efficiency analysis of China's university faculty members: A modified meta-frontier DEA approach

Traditionally, data envelopment analysis (DEA) requires all decision-making units (DMUs) to have similar characteristics and experiences within the same external conditions. In many cases, this assumption fails to hold, and thus, difficulties will be encountered to some extent when measuring efficiency with a standard DEA model. Ideally, the performance of DMUs with different characteristics could be examined using the DEA meta-frontier framework. However, some of these DMUs are mixed-type DMUs that may affiliate with more than one group. Furthermore, the total number of observations of these mixed-type DMUs is limited. This is one of the common problems when studies focus on faculty research performance in higher education institutions. In general, a faculty member is affiliated with a certain department, and if the departmental assessment policy is not suitable for faculty members who are involved in interdisciplinary research, their performance could be underestimated. Therefore, the proposed model is an extension of the DEA meta-frontier framework that can assess the performance of mixed-type DMUs by constructing the reference set without the same type of DMUs. In this paper, the scientific research efficiency of faculty members at the Inner Mongolia University is used as an example to provide a better understanding of the proposed model. The proposed model is intended to provide a fair and balanced performance assessment method that reflects actual performance, especially for mixed-type DMUs.     

Estimating global frontier shifts and global Malmquist indices

The Malmquist index is a measure of productivity changes, of which an important component is the frontier shift or technological change. Often technological change can be viewed as a global phenomenon, and therefore individual or local measures of technological changes are aggregated into an overall measure, traditionally using geometric means. In this paper we propose a way of calculating global Malmquist indices and global frontier shift indices which provides a better estimation of the true frontier shift and furthermore is easy to calculate. Using simulation studies we show how this method outperforms the traditional aggregation approach, especially for sparsely populated production possibility sets and for frontiers that also change shape over time. Furthermore, our global indices can be used for unbalanced panels without disregarding any information. Finally, we show how the global indices are meaningful for calculating differences between frontiers from different groups rather than different time periods as illustrated in a small case study of bank branches in different countries.      

Target and technical efficiency in DEA: controlling for environmental characteristics

In this paper we propose a target efficiency DEA model that allows for the inclusion of environmental variables in a one stage model while maintaining a high degree of discrimination power. The model estimates the impact of managerial and environmental factors on efficiency simultaneously. A decomposition of the overall technical efficiency into two components, target efficiency and environmental efficiency, is derived. Estimation of target efficiency scores requires the solution of a single large non-linear optimization problem and provides both a joint estimation of target efficiency scores from all DMUs and an estimation of a common scalar expressing the environmental impact on efficiency for each environmental factor. We argue that if the indices on environmental conditions are constructed as the percentage of output with certain attributes present, then it is reasonable to let all reference DMUs characterized by a composed fraction lower than the fraction of output possessing the attribute of the evaluated DMU enter as potential dominators. It is shown that this requirement transforms the cone-ratio constraints on intensity variables in the BM-model (Banker and Morey 1986) into endogenous handicap functions on outputs. Furthermore, a priori information or general agreements on allowable handicap values can be incorporated into the model along the same lines as specifications of assurance regions in standard DEA.

A novel method for computing single output for DEA with application in hospital efficiency

There are two main methods for measuring the efficiency of decision-making units (DMUs): data envelopment analysis (DEA) and stochastic frontier analysis (SFA). Each of these methods has advantages and disadvantages. DEA is more popular in the literature due to its simplicity, as it does not require any pre-assumption and can be used for measuring the efficiency of DMUs with multiple inputs and multiple outputs, whereas SFA is a parametric approach that is applicable to multiple inputs and a single output. Since many applied studies feature multiple output variables, SFA cannot be used in such cases. In this research, a unique method to transform multiple outputs to a virtual single output is proposed. We are thus able to obtain efficiency scores from calculated virtual single output by the proposed method that are close (or even the same depending on targeted parameters at the expense of computation time and resources) to the efficiency scores obtained from multiple outputs of DEA. This will enable us to use SFA with a virtual single output. The proposed method is validated using a simulation study, and its usefulness is demonstrated with real application by using a hospital dataset from Turkey.     

Modeling CRS bounded additive DEA models and characterizing their Pareto-efficient points

Dealing with weighted additive models in Data Envelopment Analysis guarantees that any projection of an inefficient unit belongs to the strong efficient frontier, among other interesting properties. Recently, constant returns to scale (CRS) range-bounded models have been introduced for defining a new additive-type efficiency measure (see Cooper et al. in J Prod Anal 35(2):85–94, 2011). This paper continues such earlier work further, considering a more general setting. In particular, we show that under free disposability of inputs and outputs, CRS bounded additive models require a double set of slacks. The second set of slacks allows us to properly characterize all the Pareto-efficient points associated to the bounded technology. We further introduce the CRS partially-bounded additive models.