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Dynamic DEA: A slacks-based measure approach

Author

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  • Miki Tsutsui

    (Central Research Institute of Electric Power Industry)

  • Kaoru Tone

    (National Graduate Institute for Policy Studies)

Abstract

In data envelopment analysis, there are several methods for measuring efficiency change over time, e.g. the window analysis and the Malmquist index. However, they usually neglect carry-over activities between consecutive two terms. These carry-overs play an important role in measuring the efficiency of decision making units in each term as well as over the whole terms based on the long-term viewpoint. Dynamic DEA model proposed by Färe and Grosskopf is the first innovative contribution for such purpose. In this paper we develop their model in the slacks-based measure (SBM) framework, called Dynamic SBM (DSBM). The SBM model is non-radial and can deal with inputs/outputs individually, contrary to the radial approaches that assume proportional changes in inputs/outputs. Furthermore, according to the characteristics of carry-overs, we classify them into four categories, i.e. desirable, undesirable, free and fixed. Desirable carry-overs correspond, for example, to profit carried forward and net earned surplus carried to the next term, while undesirable carry-overs include, for example, loss carried forward, bad debt and dead stock. Free and fixed carry-overs indicate, respectively, discretionary and non-discretionary ones. We develop Dynamic SBM models that can evaluate the overall efficiency of decision making units for the whole terms as well as the term efficiencies.

Suggested Citation

  • Miki Tsutsui & Kaoru Tone, 2008. "Dynamic DEA: A slacks-based measure approach," GRIPS Discussion Papers 08-13, National Graduate Institute for Policy Studies.
    • Handle: RePEc:ngi:dpaper:08-13
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    Keywords

    DEA; Dynamic DEA; DSBM; Carry-over;
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