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Data Envelopment Analysis

In: Nonparametric Estimation of Educational Production and Costs using Data Envelopment Analysis

Author

Listed:
  • Vincent Blackburn

    (New South Wales Department of Education and Communities)

  • Shae Brennan

    (University of Cincinnati)

  • John Ruggiero

    (University of Dayton)

Abstract

Analysis of performance has economic production theory as its foundation. Firms employ inputs to produce output with an incentive to either maximize profits or minimize costs. Technically inefficient firms could either increase outputs (and therefore revenue) holding inputs constant or could decrease inputs (and hence costs) holding outputs constant. As a result, technically inefficient firms are neither profit maximizing nor cost minimizing. The seminal paper on technical efficiency measurement was Farrell (1957) which provided a decomposition of inefficiency into technical and allocative parts. From an input-oriented perspective, firms that are not operating on the isoquant associated with observed production are technically inefficient. Farrell provided a comprehensive measure of technical efficiency as the equiproportional reduction of all inputs holding output at current levels. Proportional reduction in observed inputs holds the input mix constant. Cost minimization, however, requires not only production on the isoquant but also the appropriate mix of inputs that depends on the associated input prices. Hence, if technically efficient firms are not using the allocatively efficient input mix they could still lower costs by adjusting input levels accordingly.

Suggested Citation

  • Vincent Blackburn & Shae Brennan & John Ruggiero, 2014. "Data Envelopment Analysis," International Series in Operations Research & Management Science, in: Nonparametric Estimation of Educational Production and Costs using Data Envelopment Analysis, edition 127, chapter 0, pages 11-49, Springer.
    • Handle: RePEc:spr:isochp:978-1-4899-7469-3_2
    DOI: 10.1007/978-1-4899-7469-3_2
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    Citations

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    Cited by:

    1. Victor V. Podinovski & Wan Rohaida Wan Husain, 2017. "The hybrid returns-to-scale model and its extension by production trade-offs: an application to the efficiency assessment of public universities in Malaysia," Annals of Operations Research, Springer, vol. 250(1), pages 65-84, March.
    2. Omphile Temoso & Lindikaya W. Myeki, 2023. "Estimating South African Higher Education Productivity and Its Determinants Using Färe-Primont Index: Are Historically Disadvantaged Universities Catching Up?," Research in Higher Education, Springer;Association for Institutional Research, vol. 64(2), pages 206-227, March.

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