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Technical efficiency bias in data envelopment analysis caused by intra-output aggregation

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  • Darold T. Barnum
  • John M. Gleason

Abstract

We show that an organization's technical efficiency scores are biased downward by linear aggregation of the quantities of the same type of output that are produced by multiple subunits (intra-output aggregation). We expand the models of Fare et al. (2002, 2004) and Barnum and Gleason (2005) to account for intra-output aggregation bias, yielding an expanded model in which technical efficiency is unbiased by any type of input or output aggregation. We illustrate intra-output aggregation bias with data envelopment analysis results from Canadian paratransit operations.

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  • Darold T. Barnum & John M. Gleason, 2007. "Technical efficiency bias in data envelopment analysis caused by intra-output aggregation," Applied Economics Letters, Taylor & Francis Journals, vol. 14(9), pages 623-626.
    • Handle: RePEc:taf:apeclt:v:14:y:2007:i:9:p:623-626
    DOI: 10.1080/13504850500461647
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    References listed on IDEAS

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    1. Loren Tauer, 2001. "Input aggregation and computed technical efficiency," Applied Economics Letters, Taylor & Francis Journals, vol. 8(5), pages 295-297.
    2. Darold Barnum & John Gleason, 2005. "Technical efficiency bias caused by intra-input aggregation in data envelopment analysis," Applied Economics Letters, Taylor & Francis Journals, vol. 12(13), pages 785-788.
    3. Darold Barnum & John Gleason, 2006. "Measuring efficiency in allocating inputs among outputs with DEA," Applied Economics Letters, Taylor & Francis Journals, vol. 13(6), pages 333-336.
    4. Darold Barnum & John Gleason, 2006. "Biases in technical efficiency scores caused by intra-input aggregation: mathematical analysis and a DEA application using simulated data," Applied Economics, Taylor & Francis Journals, vol. 38(14), pages 1593-1603.
    5. Rolf Fare & Valentin Zelenyuk, 2002. "Input aggregation and technical efficiency," Applied Economics Letters, Taylor & Francis Journals, vol. 9(10), pages 635-636.
    6. Rolf Fare & Shawna Grosskopf & Valentin Zelenyuk, 2004. "Aggregation bias and its bounds in measuring technical efficiency," Applied Economics Letters, Taylor & Francis Journals, vol. 11(10), pages 657-660.
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    1. Nguyen-Hoang, Phuong & Yeung, Ryan, 2010. "What is paratransit worth?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 44(10), pages 841-853, December.
    2. Barnum, Darold T. & Karlaftis, Matthew G. & Tandon, Sonali, 2011. "Improving the efficiency of metropolitan area transit by joint analysis of its multiple providers," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 47(6), pages 1160-1176.

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