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Consequences of omitting relevant inputs on the quality of the data envelopment analysis under different input correlation structures

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  • Andrés Ramírez Hassan

Abstract

This paper establishes the consequences of a wrong specification on the quality of the data envelopment analysis. Specifically, the case of omitting a relevant variable in the input oriented problem is analyzed when there are different correlation structures between the inputs. It is established that the correlation matrix gives relevant information about the homogeneity of the decision making units and the intensity of inputs used in the production process. The methodology is based on a series of Monte Carlo simulations and the quality of the data envelopment analysis is measured as the difference between the true efficiency and the efficiency calculated. It is found that omitting relevant inputs causes inconsistency, and this problem is worse when there is a negative correlation structure.

Suggested Citation

  • Andrés Ramírez Hassan, 2008. "Consequences of omitting relevant inputs on the quality of the data envelopment analysis under different input correlation structures," Documentos de Trabajo de Valor Público 10627, Universidad EAFIT.
    • Handle: RePEc:col:000122:010627
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    File URL: http://repository.eafit.edu.co/bitstream/10784/556/1/2008-1%20Andres%20Ramirez%20Hassan.pdf
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    References listed on IDEAS

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    1. 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.
    2. repec:bla:scandj:v:87:y:1985:i:4:p:594-604 is not listed on IDEAS
    3. A. Charnes & W. W. Cooper & E. Rhodes, 1981. "Evaluating Program and Managerial Efficiency: An Application of Data Envelopment Analysis to Program Follow Through," Management Science, INFORMS, vol. 27(6), pages 668-697, June.
    4. 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.
    5. Charnes, A. & Cooper, W. W. & Huang, Z. M. & Sun, D. B., 1990. "Polyhedral Cone-Ratio DEA Models with an illustrative application to large commercial banks," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 73-91.
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    2. Breitenbach, Marthinus C & Ngobeni, Victor & Ayte, Goodness, 2020. "The first 100 days of COVID-19 coronavirus – How efficient did country health systems perform to flatten the curve in the first wave?," MPRA Paper 8872, University Library of Munich, Germany.
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    4. Ngobeni, Victor & Breitenbach, Marthinus C, 2021. "Production and Scale Efficiency of South African Water Utilities: The Case of Water Boards," MPRA Paper 106242, University Library of Munich, Germany.
    5. Victor Ngobeni & Marthinus C. Breitenbach & Goodness C. Aye, 2020. "Technical Efficiency of Provincial Public Healthcare in South Africa," Working Papers 202013, University of Pretoria, Department of Economics.

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