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Data Envelopment Analysis for Performance Evaluation: A Child’s Guide

Author

Listed:
  • RAY, SUBHASH C.

    (University of Connecticut)

  • CHEN, LEI

    (University of Connecticut)

Abstract

In this paper we offer a simple exposition of the neoclassical production theoretic foundations of Data Envelopment Analysis. The concepts of technical efficiency (both input- and output-oriented), scale efficiency, and cost efficiency are explained and the corresponding DEA models are described in details. We offer step-by-step instruction on how to write the codes for solving the various DEA models using the Solver option in the widely accessible MS Excel software. An important feature of this paper is a detailed exposition of how to write various Visual Basic Macro programs for solving DEA problems. We also describe the non-convex Free Disposal Hull (FDH) procedure and the secondstage regression analysis that seeks to account for variation in measured efficiency scores due to external factors.

Suggested Citation

  • Ray, Subhash C. & Chen, Lei, 2010. "Data Envelopment Analysis for Performance Evaluation: A Child’s Guide," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 45(2), pages 79-124.
    • Handle: RePEc:dse:indecr:0024
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    References listed on IDEAS

    as
    1. Ray,Subhash C., 2012. "Data Envelopment Analysis," Cambridge Books, Cambridge University Press, number 9781107405264, January.
    2. Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
    3. R. D. Banker & A. Charnes & W. W. Cooper, 1984. "Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis," Management Science, INFORMS, vol. 30(9), pages 1078-1092, September.
    4. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
    5. William W. Cooper & Lawrence M. Seiford & Kaoru Tone, 2007. "Data Envelopment Analysis," Springer Books, Springer, edition 0, number 978-0-387-45283-8, June.
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    Cited by:

    1. Giuseppe Coco & Raffaele Lagravinese & Giuliano Resce, 2020. "Beyond the weights: a multicriteria approach to evaluate inequality in education," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 18(4), pages 469-489, December.
    2. Maha Kalai, 2019. "Nonparametric Measures of Capacity Utilization of the Tunisian Manufacturing Industry: Short- and Long-Run Dual Approach," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 10(1), pages 318-334, March.

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    More about this item

    Keywords

    Efficiency; Linear Programming; Benchmarking; Excel Solver;
    All these keywords.

    JEL classification:

    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact

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