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Cluster-Adjusted DEA Efficiency in the presence of Heterogeneity: An Application to Banking Sector

Author

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  • Sakouvogui Kekoura

    (Mathematical Statistician, U.S Census Bureau, Washington D.C.)

  • Shaik Saleem

    (Department of Agribusiness and Applied Economics, North Dakota State University)

  • Addey Kwame Asiam

    (Department of Agribusiness and Applied Economics, North Dakota State University)

Abstract

This paper improves on the issues of extreme data points and heterogeneity found in the linear programming data envelopment analysis (DEA) by presenting a cluster-adjusted DEA model (DEA with cluster approach). This analysis, based on efficiency, determines the number of clusters via Gap statistic and Elbow methods. We use the December quarterly panel data consisting of 122 U.S agricultural banks across 37 states from 2000 to 2017 to estimate the cluster-adjusted DEA model. Empirical results show differences in the estimated DEA efficiency measures with and without a clustering approach. Furthermore, using non-parametric tests, the results of Ansari-Bradley, Kruskal Wallis, and Wilcoxon Rank Sum tests suggest that the cluster-adjusted DEA model provides statistically better efficiency measures in comparison to the DEA model without a clustering approach.

Suggested Citation

  • Sakouvogui Kekoura & Shaik Saleem & Addey Kwame Asiam, 2020. "Cluster-Adjusted DEA Efficiency in the presence of Heterogeneity: An Application to Banking Sector," Open Economics, De Gruyter, vol. 3(1), pages 50-69, January.
    • Handle: RePEc:vrs:openec:v:3:y:2020:i:1:p:50-69:n:4
    DOI: 10.1515/openec-2020-0004
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    References listed on IDEAS

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    Cited by:

    1. Sakouvogui Kekoura & Guilavogui Mama Genevieve, 2022. "How are the United States Banks faring during the COVID-19 Pandemic? Evidence of Economic Efficiency Measures," Open Economics, De Gruyter, vol. 5(1), pages 11-29, January.
    2. S. Demin, 2023. "COVID-19 Quarantine Measures Efficiency Evaluation by Best Tube Interval Data Envelopment Analysis," SN Operations Research Forum, Springer, vol. 4(1), pages 1-12, March.
    3. Yen, Barbara T.H. & Li, Jun-Sheng, 2022. "Route-based performance evaluation for airlines – A metafrontier data envelopment analysis approach," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 162(C).

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    More about this item

    Keywords

    Banking; Cluster analysis; Efficiency Analysis; Nonparametric tests;
    All these keywords.

    JEL classification:

    • A10 - General Economics and Teaching - - General Economics - - - General
    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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