A new Slacks-Based Measure of Malmquist-Luenberger Index in the Presence of Undesirable Outputs

ArticleinOmega 51:29-37 · March 2015with 446 Reads
Cite this publication
Abstract
In the majority of production processes, noticeable amounts of bad byproducts or bad outputs are produced. The negative effects of the bad outputs on efficiency cannot be handled by the standard Malmquist index to measure productivity change over time. Toward this end, the Malmquist-Luenberger index (MLI) has been introduced, when undesirable outputs are present. In this paper, we introduce a Data Envelopment Analysis (DEA) model as well as an algorithm, which can successfully eliminate a common infeasibility problem encountered in MLI mixed period problems. This model incorporates the best endogenous direction amongst all other possible directions to increase desirable output and decrease the undesirable outputs at the same time. A simple example used to illustrate the new algorithm and a real application of steam power plants is used to show the applicability of the proposed model.

Do you want to read the rest of this article?

Request Full-text Paper PDF
  • Article
    China has achieved significant progress in terms of economic and social developments since implementation of reform and open policy in 1978. However, the rapid speed of economic growth in China has also resulted in high energy consumption and serious environmental problems, which hindering the sustainability of China’s economic growth. This paper provides a framework for measuring eco-efficiency with CO2 emissions in Chinese manufacturing industries. We introduce a global Malmquist-Luenberger productivity index (GMLPI) that can handle undesirable factors within Data Envelopment Analysis (DEA). This study suggested after regulations imposed by the Chinese government, in the last stage of the analysis, i.e. during 2011-2012, the contemporaneous frontier shifts towards the global technology frontier in the direction of more desirable outputs and less undesirable outputs, i.e. producing less CO2 emissions, but the GMLPI drops slightly. This is an indication that the Chinese government needs to implement more policy regulations in order to maintain productivity index while reducing CO2 emissions.
  • Article
    One of the main objectives in restructuring power industry is enhancing the efficiency of power facilities. However, power generation industry, which plays a key role in the power industry, has a noticeable share in emission amongst all other emission-generating sectors. In this study, we have developed some new Data Envelopment Analysis models to find efficient power plants based on less fuel consumption, combusting less polluting fuel types, and incorporating emission factors in order to measure the ecological efficiency trend. We then applied these models to measuring eco-efficiency during an eight-year period of power industry restructuring in Iran. Results reveal that there has been a significant improvement in eco-efficiency, cost efficiency and allocative efficiency of the power plants during the restructuring period. It is also shown that despite the hydro power plants look eco-efficient; the combined cycle ones have been more allocative-efficient than the other power generation technologies used in Iran.
  • Article
    This study investigated the capacity utilization (CU) of Chinese manufacturing industries, using a CU indicator based on data envelopment analysis and directional distance functions (DDFs). The inputs were separated into variable inputs and a quasi-fixed input to measure the gap of DDFs, which indicated either under-utilization of inputs or Overcapacity. Moreover, we defined an indicator for CU change over time and introduced the corresponding decomposition. We noted that, during the study time period (2007–2010), the CU of Chinese manufacturing industries improved, which implies that Chinese manufacturing industries expanded their production and got closer to their capacity during this time period. The driving force of this improvement was technical changes. The higher average CU values of light manufacturing industries than that of the heavy industries and the extremely high CU values of two light industries reveal a severe overcapacity problem in the light industries. We also provide the methods and conduct analysis on determining optimal variable inputs and the type of the overcapacity on specific DMUs. The bootstrap regression procedures are employed to test the influence of environmental variables on CU values. Finally, we provide policy implications and suggestions for policymakers who oversee the development of Chinese manufacturing industries.
  • Article
    The existing studies on environmental efficiency evaluation generally have the problem of efficiency overestimation. To solve this problem, a new data envelopment analysis (DEA) cross‐efficiency approach with undesirable outputs is developed to evaluate environmental efficiency from the perspectives of both self‐evaluation and peer evaluation. Then, three new evaluation strategies, namely, economic development strategy, environmental protection strategy, and win–win strategy, are proposed to reflect the needs of decision makers under different policy objectives. The proposed cross‐efficiency approach with different evaluation strategies not only realizes the cross evaluation of environmental efficiency, but also guarantees the relative uniqueness of the optimal solution on the basis of the preferences of decision makers. Combining the metafrontier DEA approach and DEA window analysis, a new cross‐efficiency analytical framework is constructed to gradually analyse the influences of policy objectives, technology heterogeneity, and dynamic correlation on the environmental efficiency. Subsequently, the environmental efficiency of China's economic development during 2006–2015 is in‐depth analysed on the basis of the proposed analytical framework, and some interesting conclusions, and some useful suggestions are obtained.
  • Article
    China has become the world largest paper and paperboard producer. However, pulp and paper industry has involved high resource consumption and severe pollution especially for water. This research has assessed the eco-efficiency of China’s pulp and paper industry at the national level and provincial level. An overview regarding the cleaner production of China’s pulp and paper industry was presented to reveal the measures for reducing environmental impact in the last two decades. Slacks-based measure was used to analyze the efficiency levels of 16 provinces’ pulp and paper industries. To uncover the underlying causes of eco-efficiency performance, Malmquist–Luenberger index was calculated to discover the drivers of productivity growth of pulp and paper industries. Our results showed that the pollution treatment of China’s pulp and paper industry has made progress in terms of water consumption and water pollution, although the absolute amount of pollution discharge is still large. Chemical oxygen demand emissions are still the first critical influencing factor of pulp and paper industry’s inefficiency. Furthermore, efficiency progress was the dominating contribution of the industry’s productivity growth between 2010 and 2013. The policies for adjusting the industrial structure of pulp and paper industry have resulted in the scale effects through eliminating backward production capacity and accelerating merger and acquisitions. Moreover, the productivity of pulp and paper industry was underestimated when the undesirable outputs were ignored. It indicates that the stricter environmental regulations have positive effects on paper companies to internalize environmental pressures in the production activities through environmental management. In the future, pulp and paper companies should further internalize the cost of pollution treatment through scale effects and technology improvement.
  • Article
    Purpose This paper aims to measure Chinese regional thermal industries’ evolution. Design/methodology/approach This paper uses data envelopment analysis (DEA) and global Malmquist–Luenberger productivity (GMLP) index. Findings The results reveal that the development of Chinese thermal power industry varies significantly in different regions, and it is highly correlated with the level of local economic development. Although the change of technical efficiency and scale efficiency had different impacts on different regions from year to year, the overall GMLP index change shows a close relationship with the contemporaneous frontier shift. Practical implications The results indicate that the Chinese Government should make efforts to promote its policy implementations and regulations in thermal industries so that the contemporaneous frontier will shift toward the global technology frontier with more desirable outputs and less undesirable outputs. Originality/value As an application, this study uses DEA and GMLP index to measure the productivity of Chinese thermal industries in 30 Chinese provinces from 2006 to 2013. The results have the meaningful policy implications for decision makers in charge of Chinese thermal industries.
  • Article
    The joint investigation of economic growth and environmental impact has led research to develop evaluation models on environmental and economic changes, especially on eco-innovation and eco-efficient products. In this paper, a novel approach is proposed to find the common set of weights in a two-stage network data envelopment analysis based on goal programming to analyze the joint effects of eco-efficiency and eco-innovation, considering the undesirable inputs, intermediate products, and the outputs in the context of big data. Applying the model to the countries in the OECD and ranking the results show that Switzerland is highest in eco-efficiency and Estonia is highest in eco-innovation.
  • Article
    Full-text available
    This paper proposes a novel Luenberger approach based on directive SBM method and Luenberger indicator to solve the intertemporal effect of dynamic factors. The new Luenberger indicator can be decomposed into dynamic pure efficiency change index, dynamic scale efficiency change index, technology progress index and dynamic effect index. The empirical application focuses on the growth performances of ocean economy in 11 coastal areas of China. The conclusions are as follows. First, the intertemporal effect of capital factor shows that the technical frontier is on the rise and the total factor productivity level is improved. The technical progress is the driving force of Chinese ocean economy growth performance. Second, the labor force, dynamic capital output and desirable output have positive relationships with the efficiency of ocean economy considering the environmental problem. However, the dynamic capital input, resource consumption and environmental pollution have negative effects, respectively. © 2018, Institute for Economic Forecasting. All rights reserved.
  • Article
    Full-text available
    Distance functions in production theory are mathematical structures that characterize the belonging to the reference technology through a numerical value, behave as technical efficiency measures when the focus is analyzing an observed input-output vector within its production possibility set and present a dual relationship with some support function (profit, revenue, cost function). In this paper, we endow the well-known weighted additive models in Data Envelopment Analysis with a distance function structure, introducing the Weighted Additive Distance Function and showing its main properties.
  • Article
    The assumptions of strong and weak disposability for undesirable outputs have long dominated studies of data envelopment analysis for environmental assessments. Unfortunately, these assumptions cannot describe the diverse technical features of different undesirable outputs during the actual production process. Thus, we introduce a non-disposal degree to develop a new semi-disposability assumption, which can replace the assumptions of strong and weak disposability in environmental assessments. This assumption ensures that decision makers can address undesirable outputs freely within the scope of current production technology; otherwise, they have to reduce desirable outputs in the same proportion to decrease undesirable outputs. A reference point comparison method is proposed for determining the non-disposal degree from an objective perspective. The assumption of semi-disposability is extended to uncertain circumstances by using the interval non-disposal degree. Finally, two empirical examples are provided to illustrate the effectiveness of the semi-disposability assumption.
  • Article
    The metafrontier framework proposed by O'Donnell et al. enables the evaluation of relative efficiencies for decision‐making units (DMUs) operating under heterogeneous technologies. The metatechnology ratio (MTR) constructed under the metafrontier framework helps estimate the gap between group frontiers and the metafrontier, with its score between 0 and 1. However, an unreasonable MTR value (ie, greater than 1) may appear when the traditional metafrontier framework is applied in the nonradial data envelopment analysis (DEA) models. This article proposes an alternative metafrontier framework for addressing this issue. The newly constructed technology gap measurement (TGM) can avoid unreasonable technology gap ratio values in nonradial DEA models and substitute for MTR in radial DEA models. To demonstrate how this alternative metafrontier approach works, this article applies it to the efficiency evaluation of regional transportation sectors in China.
  • Article
    Major drawbacks of the traditional data envelopment analysis (DEA) method include selecting optimal weights in a flexible manner, lacking adequate discrimination power for efficient decision-making units, and considering only desirable outputs. By introducing the concept of global efficiency optimization, this study proposed a double frontiers DEA approach with undesirable outputs to generate a common set of weights for evaluating all decision-making units from both the optimistic and pessimistic perspectives. For a unique optimal solution, compromise models for individual efficiency optimization were developed as a secondary goal. Finally, as an illustration, the models were applied to evaluate the energy efficiency of the Chinese regional economy. The results showed that the proposed approach could improve discrimination power and obtain a fair result in a case where both desirable and undesirable outputs exist.
  • Article
    Full-text available
    The paper presents an innovative empirical application to assess the efficiency of regional tax offices in Spain. The existing evidence about the performance of those administrative units is still limited, thus our aim is to contribute to extend this line of research by incorporating three relevant issues into our empirical analysis. First, we consider the number of complaints against tax authority decisions as a quality measure of tax management. Since the evaluated units should aim to minimize the number of complaints, this variable represents an undesirable output, thus we define a model that is adaptable to the special features of this unconventional output. Second, our empirical analysis covers the period 2005-2014, thus we can analyze the productivity change across this ten-year period including different phases of the economic cycle. Finally, seeking robustness, we use enhanced versions of the Malmquist-Luenberger productivity index and the Luenberger productivity indicator that allow us to overcome some of the drawbacks suffered by the original approach. The results obtained with both indices are very similar and indicate that during the evaluated period tax offices suffered a slight worsening in terms of productivity, especially during the years previous to the economic crisis (2005-2008). This regression was mainly due to the technical regression experienced by the majority of units during those years.
  • Article
    Full-text available
    The Chinese government announced to cut its carbon emissions intensity by 60-65% from its 2005 level. To realize the national abatement commitment, a rational allocation into its subunits (i.e., industries, provinces) is eagerly needed. Centralized allocation models can maximize the overall interests, but might cause implementation difficulty and fierce resistance from individual subunits. Based on this observation, this paper will address the carbon emission abatement quota allocation problem from decentralized perspective, taking the competitive and cooperative relationships simultaneously into account. To this end, this paper develops an integrated cooperative game data envelopment analysis (DEA) approach. We first investigate the relative efficiency evaluation by taking flexible carbon emission abatement allocation plans into account, and then define a super-additive characteristic function for developing a cooperative game among units. To calculate the nucleolus-based allocation plan, a practical computation procedure is developed based on the constraint generation mechanism. Further, we present a two-layer way to allocate the CO2 abatement quota into different sub-industries and further different provinces in Chinese manufacturing industries. The empirical results show that five sub-industries (Processing of petroleum, coking and processing of nuclear fuel; Smelting and pressing of ferrous metals; Manufacture of non-metallic mineral products; Manufacture of raw chemical materials and chemical product; Smelting and pressing of non-ferrous metals) and two provinces (Guangdong and Shandong) will be allocated more than 10% of the total national carbon emission abatement quota.
  • Article
    Full-text available
    This paper aims to explore the true green efficiency of ocean economy in 11 coastal regions of China over 2004-2014. An extended three-stage DEA is proposed to improve the efficiency assessment of ocean economy. Malmquist-Luenberger productivity indexes are introduced into three-stage DEA model, which can simultaneously account for the impacts of undesirable outputs, environmental variables, and statistical noise. The results show that the environmental variables have significant impacts on regional ocean efficiency. Comparing with Malmquist productivity indexes, the average Malmquist-Luenberger productivity indexes of ocean economy have deteriorated over the past ten years. After eliminating the influences of environmental variables and statistical noise, the efficiency change and technical change of regional ocean economy are lower than the unadjusted case and technology inefficiency is the major cause of the inefficiency in China. Finally, a clustering matrix of the green efficiency of the regional ocean economy is presented to illustrate spatial refraction among 11coastal regions. © 2016, Institute for Economic Forecasting. All right reserved.
  • Article
    The conventional Malmquist productivity index (MPI), which ignores the internal structure of a production system when measuring changes in performance between two periods, may produce misleading results. This paper thus takes the operations of the component processes into account in investigating the MPI of parallel production systems. A relational data envelopment analysis (DEA) model is developed to measure the biennial MPIs of the system and internal processes at the same time, and it is shown that the former is a linear combination of the latter. This decomposition helps identify the processes that cause the decline in performance of the system. An example of 39 branches of a commercial bank, with deposits, sales, and services as the three major functions operating in parallel, is used to illustrate this approach.
  • Article
    This study attempts to employ the Malmquist index approach to evaluate the energy-related CO2 emissions performance of China's agricultural sector. The evaluation is based on the application of Data envelopment analysis (DEA) model, using the environmental production technology that allows for desirable outputs and undesirable outputs in the production process. The study covers the period 2003-2010 and thirty provincial regions. The values of the Malmquist index and their corresponding components (technical efficiency change and technological progress change) are derived from the distance function. Empirical results show that the average annual growth of the Malmquist index, accounting for the undesirable output CO2, is 6%, and the aggregated growth of the Malmquist index is approximately 48.5%. Additionally, the two components indices help to clarify the role played by technical efficiency change and technological progress change in the final performance. Moreover, in order to illustrate the differences in CO2 emissions performance of the different regions in China, we employ the Theil index methodology for decomposing the Malmquist index in per unit CO2 emissions and provide further analysis.
  • Article
    Full-text available
    Incorporating Material Balance Principle in industrial and agricultural performance measurement systems with pollutant factors has been on the rise in recent years. Many conventional methods of performance measurement have proven incompatible with the material flow conditions. This study will address the issue of eco-efficiency measurement adjusted for pollution, taking into account materials flow conditions and the Material Balance Principle (MBP) requirements, in order to provide ‘real’ measures of performance that can serve as guides when making policies. We develop a new approach by integrating slacks-based measure to enhance the Malmquist Luenberger Index by a material balance condition that reflects the conservation of matter. This model is compared with a similar model, which incorporates MBP using the trade-off approach to measure productivity and eco-efficiency trends of power plants. Results reveal similar findings for both models substantiating robustness and applicability of the proposed model in this paper.
  • Article
    Due to the ongoing increase in the number of commercial flights, greenhouse gas emissions from aviation are expected to rise significantly. Balancing the pursuit of productivity growth with environmental-footprint control policies comprises a long-term regulatory challenge. In this light, the main goals of the present paper are: (i) to measure the CO2 emissions of European airlines from 2000 to 2010, (ii) to compute airlines’ productivity in developing an environmental-sensitive productivity index, (iii) to compare the obtained results with those resulting from a traditional index, and (iv) to identify the drivers affecting productivity changes. Our results show that on average, airlines’ relative CO2 emissions have decreased. Although the airlines we studied experienced an average productivity increase—both considering and not considering negative externalities production—environmentally sensible productivity growth is lower than traditional productivity growth. Finally, we find that improvements in load factor as well as a combined increase in stage length and aircraft size affect productivity changes positively, while fuel efficiency is significant only in the case of a CO2-sensitive measure of productivity.
  • Article
    We investigate the components of China's green total factor productivity (TFP) growth from two different perspectives-that of technology contribution and that of factors contribution-using a non-parametric production frontier approach. For this purpose, we develop a biennial non-radial directional distance function measure (BNDDM) by combining biennial environmental technology and the non-radial directional distance function. This new approach can overcome the well-known infeasibility problem and incorporate the total slacks of variables. We further extend BNDDM in a dynamic perspective to propose a BNDDM-based Luenberger productivity indicator that is capable of measuring green TFP growth. Then, we explore the drivers of China's green TFP based on the proposed methodology from 1999 to 2012. The empirical results are as follows: first, China's green TFP improves by 2.02% annually, although this improvement has recently slowed. Second, technological progress is the main driver of green TFP from the technology-contribution view; reductions in COD and SO2, as well as labor saving, are the main drivers from the factor-contribution view. Third, China suffers from two kinds of "double deterioration": the deterioration of efficiency and the scale effect as well as that of harmony in both traditional and green TFP among the three regions.
  • Chapter
    The DEA technique measures efficiency in a relative manner, in that the performances of the DMUs in a group are compared with each other. The efficient ones may not be efficient when compared with the DMUs of other groups. Similarly, the inefficient ones may become efficient when compared with those of other groups. The efficiency measures for DMUs of different groups are thus not comparable.
  • Article
    Assessing eco-efficiency of companies is important to ensure the creation of wealth without compromising the needs of future generations. This work aims to extend the eco-efficiency concept by including in the assessment new features related to environmental benefits and environmental burdens. This concept is implemented using an innovative Directional Distance Function model, which searches for improvements in the magnitude of the indicators and in the composition of the resources consumed. This framework can help firms to become more sustainable by replacing non-renewable inputs with “greener” alternatives. We present an empirical application to large mining companies. Different scenarios regarding managerial priorities for adjustments to firms' economic and environmental indicators are explored. The results obtained and their managerial implications are discussed in the context of mining firms activity.
  • Article
    This study systematically summarizes previous research efforts on Data Envelopment Analysis (DEA) applied to energy and environment in the past four decades, including concepts and methodologies on DEA environmental assessment. Industrial developments are very important for all nations in terms of their economic prosperities. A problem is that the development produces various pollutions on air, water and others types of contaminations, all of which are usually associated with our health problems and climate changes. Thus, it is necessary for us to consider how to make a balance between economic success and pollution mitigation to maintain a high level of social sustainability in the world. It is widely considered that DEA is one of methodologies to examine the level of sustainability. This study examines a recent research trend on DEA applications from 1980’s to 2010’s. Nowadays, many researchers have paid serious attention to how to combat various difficulties in the areas on energy and environment. As a result, the number of articles on DEA applications on energy and environment has dramatically increased, particularly after 2000’s. However, it is true that DEA has strengths and drawbacks in the applications. Therefore, it is very important for us to carefully use DEA for guiding large policy issues and business strategies such as the global warming and climate change. An underlying premise of this study is that technology innovation in engineering and natural science may solve various problems by linking it with political and managerial efforts. The use of DEA provides a methodological linkage among them, so enhancing the practicality in mitigating problems due to climate change and environmental pollutions. This literature study, along with a summary on conceptual and methodological developments, provides us with guidelines for our future research works on DEA on energy and environment issues.
  • Article
    Energy environmental and non-radial Malmquist indexes are proposed employing a non-radial directional distance function to evaluate fossil energy saving and CO2 emissions reduction performance, and dynamic change in performance internationally. Renewable energy is also proposed as an essential energy input for the models. An empirical study of 26 Organization for Economic Cooperation and Development countries and Brazil, Russia, India, and China was performed, with the following outcomes: fossil energy saving and CO2 emissions reduction performance is underestimated for most countries, regardless of renewable energy input, however, this underestimation has little influence on performance rankings; there is no significant correlation between the proportion of renewable energy consumption and fossil energy saving and CO2 emissions reduction performance; the 30 countries can be divided into four categories with corresponding specific strategies for energy saving and emissions reduction; Generally, technological progress and efficiency improvement are out of sync, mainly because of the difficulty to achieve the efficiency improvements.
  • Article
    The output–input ratio and radial distance function measures discussed in the preceding two chapters are essentially the same approach expressed in different forms, bearing the primal-dual relationship. The basic idea is to measure the relative distance between the DMU being evaluated and its projection on the production frontier along the ray from the origin pointing at the DMU. The efficiencies are thus radial measures. In contrast, there are also non-radial measures, and slacks-based measures are the major branch of these.
  • Article
    The assessment of the efficiency performance of the electricity sector has been the focus of attention of several studies, but there is a lack of scientific literature specifically addressing the financial performance of electric utilities during the period mainly impacted by the financial turmoil in the world’s financial markets. Hence, this paper is aimed at assessing the financial performance of regulated companies operating in the Portuguese electricity market from 2010 to 2014, a period particularly marked by the financial assistance provided to the Portuguese government. With this objective in mind, we propose a modelling framework which combines the use of the Generalized Method of Moments estimation method with Data Envelopment Analysis. The Generalized Method of Moments estimation method allowed us to select the intrinsic corporate variables that were then used to assess the financial performance of electricity companies through the Slacks-Based Measure model. In this framework, the return on equity, the leverage and the cash flow to total assets were selected as outputs, while the values of depreciations and amortizations to total assets have been regarded as inputs. Our findings suggest that both in 2010 and 2014 the majority of non-efficient companies should foster the investment in new fixed assets in order to become efficient. Additionally, in both periods, the majority of inefficient electricity companies should further increase their return on equity in order to become efficient, highlighting the role of this financial indicator in the explanation of financial efficiency. Moreover, in 2014, non-efficient companies are able to efficiently generate cash flows since almost no adjustments are required regarding the cash flow to total assets values attained for these companies. Finally, the need to promote leverage in order to increase financial performance is more evident in 2010 than in 2014, signalling the need to reduce the level of debt of these companies in this period.
  • Article
    This paper analyzes the environmental and economic efficiency of a sample of firms located in Italy and Germany, operating in the chemical sector and included in the European Pollution Release and Transfer Register (E-PRTR). The Directional Distance Function (DDF) approach in a conditional setting has been applied to obtain efficiency score and Total Factor Productivity (TFP) growth indexes considering pollution in computations. Emissions increase in absolute term between 2004 and 2007, with a worse performance of Italian firms, but efficiency indicators show a reduction of inefficiency over time, with similar performance of firms from the two countries. The formal test for the Porter’s hypothesis suggests that chemical firms suffering higher compliance costs in the first period react with investment increasing productivity in the following years. The empirical evidence, robust to different specifications and estimation methods, supports the presence of win–win opportunities.
  • Article
    Full-text available
    The Malmquist–Luenberger productivity index would cause infeasible problem when measuring mixed period change of total factor productivity. The former research focuses on the infeasible issue under the hypothesis of constant return to scale (CRS). There are many meaningful solutions which could avoid this infeasible problem of Malmquist–Luenberger productivity index. However, these solutions couldn’t avoid infeasible problem under condition of variable returns to scale (VRS). The new solution is proposed in this paper which could solve this problem under VRS based on super-efficiency issue. The empirical results of environmental total factor productivity (ETFP) change of thirty regions in China indicate that China isn’t efficient from 1997 to 2014. Among eight economic regions northwest and southern coastal decline, the ETFP decrease 15%, 10% respectively. From the perspective of provinces in China, Hainan, Qinghai and Ningxia have the lowest environmental total factor productivity and their environmental technical efficiency is also the lowest. These non-efficient provinces all have lower gross domestic product and they should improve technique change efficiency through adopting advanced technology in the future. The fixed effects regression model illustrates that energy intensity, research and development, foreign direct investment are factors of ETFP in China. Both research and development and foreign direct investment could improve total factor productivity and this indicates that Pollutant Heaven Hypothesis doesn’t exist in China.
  • Article
    This study investigated environmental efficiency considering heterogeneity for 192 thermal power plants in the Yangtze River Delta of China from 2009 to 2011. We evaluated environmental efficiency using metafrontier directional slacks-based measure. We also testify whether heterogeneity for environmental technology increased or decreased among different provinces. We proposed a regional, time, and coal intensity effects hypothesis to explore the determinants of environmental efficiency through bootstrapped truncated regression. We found that heterogeneity for environmental technology widened from 2010 to 2011. Shanghai had the highest environmental efficiency. Environmental efficiency increased from 2009 to 2010, and declined in 2011. Coal consumption intensity negatively impacted environmental efficiency. It is critical that we should decrease the rate of coal use, and expand technology spillover of production technology and environmental technology among different provinces and power plants.
  • Article
    Full-text available
    Coal mining is one of the highest-risk industries in China. Accident deaths in coal mines attract intense concern every year. This is the first attempt to measure production efficiency of coal mines with consideration of accident deaths. A combined directional distance function and slacks-based model is proposed to assess production and safety efficiency across 18 coal-mining provinces in China. Results showed that the average total factor humanitarian-production efficiency is poor, with nearly half of production potential unexploited. Safety efficiency is also low, and half of the deaths would be avoided if all coal enterprises operated at fully efficient levels. The directional contribution analysis pointed out that southern provinces should pay more attention to accident deaths than northern ones, while the importance of reducing accident death in efficiency promotion declined for nearly all provinces, which creates a tradeoff between safety and efficiency for enterprises and regulators. The results of this study showed that the safety situation of coal mines is not as optimistic as the official data suggest. Effective prevention mechanisms are urgently needed to prevent disastrous accidents in coal mines in China.
  • Article
    This paper aims to address the problem of allocating the CO2 emissions quota set by government goal in Chinese manufacturing industries to different Chinese regions. The CO2 emission reduction is conducted in a three-stage phases. The first stage is to obtain the total amount CO2 emission reduction from the Chinese government goal as our total CO2 emission quota to reduce. The second stage is to allocate the reduction quota to different two-digit level manufacturing industries in China. The third stage is to further allocate the reduction quota for each industry into different provinces. A new inverse data envelopment analysis (InvDEA) model is developed to achieve our goal to allocate CO2 emission quota under several assumptions. At last we obtain the empirical results based on the real data from Chinese manufacturing industries.
  • Article
    Environmental regulation has been recognized as an important way to directly improve environmental performance or indirectly impact environmental performance through increasing environmental innovation. The present paper constructs an energy and carbon emission total factor productivity index using the Malmquist–Luenberger productivity index and data envelopment analysis. The proposed technique is used to measure the environmental performance of 30 Chinese provinces during the period 2010–2015. The energy and carbon emission total factor productivity measure is divided into a pure technical efficiency index and a technical progress index to provide detailed environmental performance information. Then an ordinary least squares model is adopted to analyse the impact of environmental regulation on environmental innovation operation and environmental performance by hypothesis testing. The empirical results show that environmental regulation and environmental innovation have positive direct effects on environmental performance and that market‐based environmental regulation has a positive indirect effect on environmental performance by increasing environmental innovation.
  • Conference Paper
    The assessment of the efficiency performance of the electricity sector has been the focus of attention of several studies, but there is a lack of scientific literature specifically addressing the financial performance of electric utilities. Hence, this paper is aimed at assessing the financial performance of regulated companies operating in the Portuguese electricity market. With this objective in mind, we propose a modelling framework which combines the use of the Generalized Method of Moments (GMM) estimation method with data envelopment (DEA) analysis.
  • Article
    The axiom of weak disposability is frequently imposed in data envelopment analysis (DEA) models involving undesirable outputs such as pollution. This paper sheds new light on the economic interpretation of weak disposability by developing dual formulations of the weakly disposable DEA technology. We find that the economic implications of weak disposability on the multiplier DEA problem are two-fold: (1) the shadow prices of the undesirable outputs can be positive or negative, and (2) the economic loss of the benchmark cannot exceed the suck cost of the inputs. We interpret the second implications as a limited liability condition. The dual formulations developed in this paper enable one to estimate shadow prices of the undesirable outputs using the weakly disposable technology. The insights gained are illustrated by a numerical example and an empirical application to the US power plants.
  • Article
    The need for monitoring the overall performance of countries in Sustainable Development (SD) is widely recognized, but scant attention has been devoted to methods for aggregating and analyzing vast amounts of empirical data. This paper describes the development and application of a Data Envelopment Analysis (DEA) methodology for addressing the challenges of benchmarking sustainable development. The methodology involves linear optimization techniques, and it is based on the identification of a number of attributes that provide proxy sustainable development indicators. Using these techniques, a SD index is derived, which might combine existing aggregate SD indices (developed by well-established organizations and/ or expert teams) into a single synthesizing overall SD index. We propose the use of four different modeling techniques to address these concerns and report the results of an Italian case study. From the results obtained, it is possible to note that the inefficient regions are, overall, southern regions and some central regions. In particular, their inefficiency comes from high poverty rate and CO2 emissions. Nevertheless, regional economic disparities are evident and with root in government's preferential policies towards on foreign investment for the northern regions, greater access to markets and better infrastructure. The political implication of these findings is that these regions have to concentrate to keep low the rate of CO2 emissions and to favor a good sustainable development from a social point of view. Exceptions are Basilicata and Sardegna regions, which exhibit a low poverty rate and a medium GDP per capita. The most inefficient DMUs are Sicilia Calabria, Puglia, Campania and Abruzzo. Piemonte is borderline, even though the region has a good geographical position for the industrial placement. We view this approach as a first step towards more systematic international comparisons, aimed at facilitating the diffusion of the best practices and policies from the benchmark countries to the less developed world regions.
  • Article
    Improving energy efficiency and productivity is one of the most cost-effective ways for achieving the sustainable development target in China. This paper employs non-radial directional distance function approach to empirically investigate energy efficiency and energy productivity by including CO2 emissions as an undesirable output. Three production scenarios, namely energy conservation (EC), energy conservation and emission reduction (ECER), and energy conservation, emission reduction and economic growth (ECEREG), are specified to assess China's energy efficiency and productivity growth during the period of Eleventh Five-Year Plan. Our empirical results show that there exist substantial differences in China's total-factor energy efficiency and productivity under different scenarios. Under the ECEREG scenario, the national average total-factor energy efficiency score was 0.6306 in 2005-2010, while the national average total-factor energy productivity increased by 027% annually during the period. The main driving force for energy productivity growth in China was energy technological change rather than energy efficiency change.
  • Article
    Apart from the well-known weaknesses of the standard Malmquist productivity index related to infeasibility and not accounting for slacks, already addressed in the literature, we identify a new and significant drawback of the Malmquist–Luenberger index decomposition that questions its validity as an empirical tool for environmental productivity measurement associated with the production of bad outputs. In particular, we show that the usual interpretation of the technical change component in terms of production frontier shifts can be inconsistent with its numerical value, thereby resulting in an erroneous interpretation of this component that passes on to the index itself. We illustrate this issue with a simple numerical example. Finally, we propose a solution for this inconsistency issue based on incorporating a new postulate for the technology related to the production of bad outputs.
  • Article
    This paper presents a non-radial directional distance function approach to modeling energy and CO2emission performance in electricity generation from the production efficiency point of view. We first define and construct the environmental production technologies for the countries with and without CHP plants, respectively. The non-radial direction distance function approach is then proposed and several indexes are developed to measure energy and CO2 emission performance of electricity generation. The directional distance functions established can be computed by solving a series of data envelopment analysis models. We then conduct an empirical study using the dataset for over one hundred countries. It is found that OECD countries have better carbon emission performance and integrated energy-carbon performance than non-OECD countries in electricity generation, while the difference in energy performance is not significant.
  • Article
    The problem of infeasibility arises in conventional radial super-efficiency data envelopment analysis (DEA) models under variable returns to scale (VRS). To tackle this issue, a Nerlove–Luenberger (N–L) measure of super-efficiency is developed based on a directional distance function. Although this N–L super-efficiency model does not suffer infeasibility problem as in the conventional radial super-efficiency DEA models, it can produce an infeasible solution in two special situations. The current paper proposes to modify the directional distance function by selecting proper feasible reference bundles so that the resulting N–L measure of super-efficiency is always feasible. As a result, our modified VRS super-efficiency model successfully addresses the infeasibility issues occurring either in conventional VRS models or the N–L super-efficiency model. Numerical examples are used to demonstrate our approach and compare results obtained from various super-efficiency measures.
  • Article
    This study proposes a use of Data Envelopment Analysis (DEA) to measure Returns to Scale (RTS) of US coal-fired power plants. The power plants produce not only desirable outputs (e.g., electricity) but also undesirable outputs (e.g., CO2 and NOx) as a result of their plant operations. Therefore, the proposed use of DEA also measures a new concept, or “DTS: Damages to Scale” (corresponding to RTS for undesirable outputs). Both scale measures discussed in this study are a quick-and-easy approach for assessing RTS and DTS, but not an exact method, because it does not consider a direct linkage between the two measures. This study applies the proposed approach to examine the legal validity of U.S. Clean Air Act (CAA). We find that the CAA has been legally effective and influential on the operation of coal-fired power plants in the United States because their plant operations belong to increasing RTS on a desirable output and increasing DTS on three undesirable outputs. The increasing DTS indicates a need for managerial improvement and/or engineering innovation such as advanced clean coal technology. This empirical result implies that U.S. federal and state governments need to expand the legal scope of CAA to the emission control of CO2 because the current CAA excludes the regulation on CO2 emission that is now considered as a main source of the global warming and climate change.
  • Article
    In this paper we take up the problem of positive, affine data translation within a Data Envelopment Analysis (DEA) framework.
  • Article
    Undesirable outputs are often produced together with desirable outputs. This joint production of good and bad outputs is typically ignored in traditional measures of productivity since “prices” are typically unavailable for bad outputs. Here we introduce a directional distance function and use it as a component in a new productivity index that readily models joint production of goods and bads, credits firms for reductions in bads and increases in goods, and does not require shadow prices of bad outputs. This index, as an empirical example shows, solves the problem caused by the joint production of good and bad outputs, and provides a practical managerial tool.
  • Article
    Data envelopment analysis (DEA) has gained great popularity in environmental performance measurement because it can provide a synthetic standardized environmental performance index when pollutants are suitably incorporated into the traditional DEA framework. Past studies about the application of DEA to environmental performance measurement often follow the concept of radial efficiency measures. In this paper, we present a non-radial DEA approach to measuring environmental performance, which consists of a non-radial DEA-based model for multilateral environmental performance comparisons and a non-radial Malmquist environmental performance index for modeling the change of environmental performance over time. A case study of OECD countries using the proposed non-radial DEA approach is also presented. It is found that the environmental performance of OECD countries as a whole has been improved from 1995 to 1997.
  • Book
    A sequel to his frequently cited Cost and Production Functions (1953), this book offers a unified, comprehensive treatment of these functions which underlie the economic theory of production. The approach is axiomatic for a definition of technology, by mappings of input vectors into subsets of output vectors that represent the unconstrained technical possibilities of production. To provide a completely general means of characterizing a technology, an alternative to the production function, called the Distance Function, is introduced. The duality between cost function and production function is developed by introducing a cost correspondence, showing that these two functions are given in terms of each other by dual minimum problems. The special class of production structures called Homothetic is given more general definition and extended to technologies with multiple outputs.
  • Article
    Chemical reactions and the combustion of dirty fuels, such as coal and petroleum coke (petcoke), that are used in cement production processes generate a significant amount of CO2 emissions. In this paper, we provide an eco-efficiency measure for 21 prototypes of cement industries operating in many countries by applying both a data envelopment analysis (DEA) and a directional distance function approach, which are particularly suitable for models where several production inputs and desirable and undesirable outputs are taken into account. To understand whether this eco-efficiency is due to a rational utilization of inputs or to a real carbon dioxide reduction as a consequence of environmental regulation, we analyze the cases where CO2 emissions can either be considered as an input or as an undesirable output. Empirical results show that countries where cement industries invest in technologically advanced kilns and adopt alternative fuels and raw materials in their production processes are eco-efficient. This gives a comparative advantage to emerging countries, such as India and China, which are incentivized to modernize their production processes.
  • Article
    Viewing slacks as one possible source of inefficiency, and that inputs have differential importance in the production process, this paper develops, based on the directional Russell measure of inefficiency, the non-radial Luenberger indicator. This indicator is then shown as the sum of the individual input-specific Luenberger indicators. The Luenberger indicator and its various input-specific indicators are also then shown as the composite measure of efficiency change and technical change. This decomposition enables the researcher to empirically examine the contributions of each factor input towards the productivity change and its components--efficiency change and technical change. Our proposed decomposition scheme is then empirically illustrated to analyze the eco-productivity performance behavior of the 22 OECD countries during the period 1995-2004. Our results indicate that first, the productivity change estimates yielded from the non-radial Luenberger indicator are different from those yielded from its radial counterpart, when slacks are present; second, most of these countries are found experiencing productivity growth due to technical progress alone; and finally, as regards the order of input-specific contributions towards productivity growth, capital contributes the most, followed by savings in emissions and labor, respectively.
  • Article
    The paper analyses technical efficiency of the Japanese banks from 2000 to 2007. The estimation technique is based on the Russell directional distance function that takes into consideration not only desirable outputs but also an undesirable output that is represented by non-performing loans (NPLs). The results indicate that NPLs remain a significant burden as for banks' performance. We show that banks' inputs have to be utilised more efficiently, particularly labour and premises. We also argue that a further restructuring process is needed in the segment of Regional Banks. We conclude that the Japanese banking system is still far away from being fully consolidated and restructured.
  • Article
    The nonparametric data envelopment analysis (DEA) literature on environmental efficiency (EE) considers handling undesirable outputs in two alternative ways: either in their original forms with the assumption that these are weakly disposable or in various translated forms with the assumption that these are strongly disposable. Choosing a particular approach implies adoption of a particular, distinct treatment of undesirable outputs, and hence yields a distinct set of EE estimates. To explore the effects of the interplay between choice of EE measure and specific treatment of undesirable outputs, this paper attempts to generate all possible output-oriented EE measures based on these two alternative approaches. Furthermore, guided by the argument that slacks are important in identifying properly the efficiency behavior of firms, it proposes two new alternative, slacks-based formulations of EE: one based on the range directional model, and the other on the generalized proportional distance function model. Using a confected data set of ten firms and a real-life data set of 22 OECD countries, our empirical analysis reveals that: first, EE scores are influenced not only by the choice of disposability assumption for undesirable outputs but also by the way these are treated in various translated forms; second, the choice of any particular treatment of undesirable outputs plays no role in influencing the rankings of firms; and third, our two new alternative EE formulations are, at the least, viable alternatives to existing EE measures in ranking firms according to their eco-efficiency behavior.
  • Article
    This paper introduces an alternative environmentally sensitive productivity growth index, which is circular and free from the infeasibility problem. In doing so, we integrated the concept of the global production possibility set and the directional distance function. Like the conventional Malmquist-Luenberger productivity index, it can also be decomposed into sources of productivity growth. The suggested index is employed in analyzing 26 OECD countries for the period 1990–2003. We also employed the conventional Malmquist-Luenberger productivity index, the global Malmquist productivity index and the conventional Malmquist productivity index for comparative purposes in this empirical investigation. KeywordsGlobal Malmquist-Luenberger productivity index-Circularity environmentally sensitive productivity growth-Directional distance function JEL ClassificationD24-C61-O57-Q43-Q56
  • Article
    In 1957 Farrell demonstrated how cost inefficiency could be decomposed into two mutually exclusive and exhaustive components: technical and allocative inefficiency. This result is consequence of the fact that—as shown by Shephard—the cost function and the input distance function (the reciprocal of Farrell''s technical efficiency measure) are dual to each other. Similarly, the revenue function and the output distance function are dual providing the basis for the decomposition of revenue inefficiency into technical and allocative components (see for example, Fre, Grosskopf and Lovell (1994)). Here we extend those results to include the directional distance function and its dual, the profit function. This provides the basis for defining and decomposing profit efficiency. As we show, the output and input distance functions (reciprocals of Farrell efficiency measures) are special cases of the directional distance function. We also show how to use the directional distance function as a tool for measuring capacity utilization using DEA type techniques.
  • Article
    The problem of modal choice between rail and air arises as public awareness of carbon dioxide (CO2) emissions by the transportation sector rises. In this paper, we answer this question quantitatively by performing an efficiency benchmarking analysis that takes into account life-cycle CO2 emission due to transport service provision. The paper employs nonparametric efficiency estimation methods, namely a slacks-based inefficiency measure, as well as a more conventional directional distance function approach. We apply them to a panel data set for three major railway companies and the aviation sector in Japan for the period from 1999 to 2007. Results shows that, contrary to the common argument, air transport can still be more socially efficient than rail transport, even when the environmental load due to CO2 emission is incorporated. This is due to the aviation sector’s extremely low user cost, measured in terms of in-vehicle time. In other words, aviation is a necessary transportation mode for those with a very high willingness to pay for their time. KeywordsAir and rail–Social efficiency–Slacks-based inefficiency–Directional technology distance function–Bad (undesirable) output
  • Article
    The purpose of this paper is to briefly trace the evolution of DEA from the initial publication by Charnes et al. (1978b) to the current state of the art (SOA). The state of development of DEA is characterized at four points in time to provide a perspective in both directions—past and future. An evolution map is provided which illustrates DEA growth during the 17-year period, the timing of the major events, and the interconnections and influences between topics. An extensive DEA bibliography is provided.
  • Article
    I use linear programming models to define standardised, aggregate environmental performance indicators for firms. The best practice frontier obtained corresponds to decision making units showing the best environmental behaviour. Results are obtained with data from U.S. fossil fuel-fired electric utilities, starting from four alternative models, among which are three linear programming models that differ in the way they account for undesirable outputs (pollutants) and resources used as inputs. The results indicate important discrepancies in the rankings obtained by the four models. Rather than contradictory, these results are interpreted as giving different, complementary kinds of information, that should all be taken into account by public decision-makers.
  • Article
    In this paper we use directional technology distance functions to evaluate the impact of environmental regulations on firms’ performance. Following Färe et al. [Färe, R., Grosskopf, S., Lovell, C.A.K., Pasurka, C., 1989. Multilateral productivity comparisons when some outputs are undesirable: a nonparametric approach. The Review of Economics and Statistics 71, 90–98.], we construct an index that measures opportunity costs for individual firms arising from regulations that prevent free disposal of wastes. The methodology is applied to a sample of Spanish producers of ceramic pavements. We assume that firms maximise desirable output simultaneously reducing inputs, with no change in the production of bad outputs. Our results show that when firms face environmental rules preventing free disposal of bads, their potential to increase desirable output by behaving efficiently is largely affected. We also find that large firms show smaller regulation costs.
  • Article
    Full-text available
    Since the original Data Envelopment Analysis (DEA) study by Charnes et al. [Measuring the efficiency of decision-making units. European Journal of Operational Research 1978;2(6):429–44], there has been rapid and continuous growth in the field. As a result, a considerable amount of published research has appeared, with a significant portion focused on DEA applications of efficiency and productivity in both public and private sector activities. While several bibliographic collections have been reported, a comprehensive listing and analysis of DEA research covering its first 30 years of history is not available.This paper thus presents an extensive, if not nearly complete, listing of DEA research covering theoretical developments as well as “real-world” applications from inception to the year 2007.A listing of the most utilized/relevant journals, a keyword analysis, and selected statistics are presented.
  • Article
    A nonlinear (nonconvex) programming model provides a new definition of efficiency for use in evaluating activities of not-for-profit entities participating in public programs. A scalar measure of the efficiency of each participating unit is thereby provided, along with methods for objectively determining weights by reference to the observational data for the multiple outputs and multiple inputs that characterize such programs. Equivalences are established to ordinary linear programming models for effecting computations. The duals to these linear programming models provide a new way for estimating extremal relations from observational data. Connections between engineering and economic approaches to efficiency are delineated along with new interpretations and ways of using them in evaluating and controlling managerial behavior in public programs.
  • Article
    Data envelopment analysis (DEA) measures the relative efficiency of decision making units (DMUs) with multiple performance factors which are grouped into outputs and inputs. Once the efficient frontier is determined, inefficient DMUs can improve their performance to reach the efficient frontier by either increasing their current output levels or decreasing their current input levels. However, both desirable (good) and undesirable (bad) factors may be present. For example, if inefficiency exists in production processes where final products are manufactured with a production of wastes and pollutants, the outputs of wastes and pollutants are undesirable and should be reduced to improve the performance. Using the classification invariance property, we show that the standard DEA model can be used to improve the performance via increasing the desirable outputs and decreasing the undesirable outputs. The method can also be applied to situations when some inputs need to be increased to improve the performance. The linearity and convexity of DEA are preserved through our proposal.
  • Article
    Full-text available
    We define environmental performance indicators as analytical tools that allow one to compare various plants in a firm, or various firms in an industry, with each other and with respect to certain environmental characteristics. We start from a reflection about the kind of information that should be incorporated into such indicators, and the extent to which that information should be aggregated. Existing approaches are both rare and dissimilar. They range from oversimplified indicators to more sophisticated ones, in which there is a trend to take somewhat arbitrary viewpoints. In the scope of the theory of productive efficiency, three categories of factor are taken into account, i.e. inputs, desirable production outputs and pollutants in the form of ««undesirable»» outputs. Non-parametric efficiency measures easily and usefully lend themselves to the derivation of environmental performance indicators. They are the duals of indicators that can be obtained in the traditional framework of data envelopment analysis. We use data envelopment analysis to define standardised, aggregate environmental performance indicators, that is, quantities comprised between 0 (bad performance) and 1 (good performance). Such indicators do not require the specification of anya prioriweight on the environmental impacts that are being aggregated. A discussion is proposed on such topics as an analysis of the nature and causes of environmental inefficiencies, and the relationship between ««environmental performance»» as defined in this paper and the actual global effect of industrial activities on health (toxicity) and the environment.
  • Article
    The role of the environment is an important issue in the policy-making and hence, the accurate assessment of the environmental conditions is vital. In this paper, an environmental efficiency index is developed for the OECD countries using non-parametric techniques. The approach adopted is based on the assumption that there is just one production process behind the production of both goods and pollution emissions. The index derived in this work measures the extent of the required output sacrifice, due to the transformation of the production process, from one where all outputs are strongly disposable to the one which is characterized by weak disposability of pollutants. Using this index, we first conduct cross-section comparisons on the state of each country's production process in its treatment of pollution emissions. We then trace each country's modification of their production processes overtime. The results indicate that if the disposability for CO2emissions were strictly restricted as the result of an environmental regulation, the total value of output loss to the OECD countries as a whole would correspond to 3.7, 4.8 and 3.5% of the total OECD GDP for 1980, 1985 and 1990, respectively.
  • Article
    Full-text available
    We study the macroeconomic performance of 19 OECD countries over the period 1970–1990. Performance is defined in terms of the ability of a country's macroeconomic managers to provide four services to their citizens: a high level of real GDP per capita, a low rate of inflation, a low rate of unemployment and a favorable trade balance. We use linear programming techniques to construct a best practice macroeconomic performance frontier, and to measure the performance of each country in each year relative to the frontier. We then add two environmental disamenities (carbon and nitrogen emissions) to the service list, and repeat the analysis to see if the performance rankings change. Throughout the analysis emphasis is placed on a comparison of the performance of 14 European OECD countries with that of five non-European OECD countries. We find that performance rankings do change, and that the relative performance of the European countries declines, when the environmental disamenities are added to the service list.
  • Article
    This study discusses a new DEA (Data Envelopment Analysis) approach to measure the unified (operational and environmental) efficiency of energy firms. It is widely known that they produce not only desirable (good) outputs (e.g., electricity) but also undesirable (bad) outputs (e.g., CO2) as a result of their plant operations. The proposed approach incorporates an output separation (desirable and undesirable outputs) for the performance evaluation of energy firms. In addition to the output separation, this study separates inputs into energy and non-energy inputs. Consequently, the proposed approach incorporates not only the output separation but also the input separation within a computational framework of DEA non-radial measurement. This study compares the proposed approach with other previous DEA approaches used for the performance evaluation of energy firms. After the methodological comparison, this study applies the proposed approach for measuring the unified efficiency of Japanese fossil fuel power generation. This empirical study confirms that the implementation of Kyoto Protocol (2005) has not been effective on the unified efficiency of Japanese fossil fuel power generation during the observed period (2004–2008). Although the empirical result is inconsistent with the current Japanese environmental policy under Kyoto Protocol, it contains policy implications for guiding the future direction of Japanese environmental policy on the electric power industry.
  • Article
    The development of viable and challenging performance measurement systems in multi-unit organisations receives increased attention in recent years. Performance is no longer viewed as a static phenomenon that reflects the past history of operating systems. There is increasing appreciation for the value of performance scenarios which can be used to guide management for the expected performance consequences of alternative policies. In this paper we demonstrate how data envelopment analysis can be used to develop policy making scenarios that would enable managers to identify the response of productive units such as power plants to different priorities regarding demand of services, costs and pollution emissions.
  • Article
    This study derives the relationship between environmental production functions and environmental directional distance functions. These two approaches make different assumptions when modeling the joint production of good and bad outputs. The environmental production function credits a producer solely for expanding good output production, while the directional environmental distance function credits a producer for simultaneously increasing production of the good output and reducing production of bad outputs. Estimates of technical efficiency and pollution abatement costs are calculated using data from coal-fired power plants. These results provide the empirical basis for comparing the environmental production function to the environmental directional distance function.
  • Article
    We develop two slacks-based efficiency measures for modeling environmental performance on the basis of environmental DEA technology. Of the two measures, one is a composite index with a higher discriminating power for modeling economic-environmental performance, and the other can be used to estimate the impacts of environmental regulations. We apply the proposed measures to model the CO(2) emissions of 30 OECD countries from 1998 to 2002 and present the results obtained. (c) 2005 Elsevier B.V. All rights reserved.
  • Article
    A nonlinear (nonconvex) programming model provides a new definition of efficiency for use in evaluating activities of not-for-profit entities participating in public programs. A scalar measure of the efficiency of each participating unit is thereby provided, along with methods for objectively determining weights by reference to the observational data for the multiple outputs and multiple inputs that characterize such programs. Equivalences are established to ordinary linear programming models for effecting computations. The duals to these linear programming models provide a new way for estimating extremal relations from observational data. Connections between engineering and economic approaches to efficiency are delineated along with new interpretations and ways of using them in evaluating and controlling managerial behavior in public programs.
  • Article
    In DEA, there are typically two schemes for measuring efficiency of DMUs; radial and non-radial. Radial models assume proportional change of inputs/outputs and usually remaining slacks are not directly accounted for inefficiency. On the other hand, non-radial models deal with slacks of each input/output individually and independently, and integrate them into an efficiency measure, called slacks-based measure (SBM). In this paper, we point out shortcomings of the SBM and propose four variants of the SBM model. The original SBM model evaluates efficiency of DMUs referring to the furthest frontier point within a range. This results in the hardest score for the objective DMU and the projection may go to a remote point on the efficient frontier which may be inappropriate as the reference. In an effort to overcome this shortcoming, we first investigate frontier (facet) structure of the production possibility set. Then we propose Variation I that evaluates each DMU by the nearest point on the same frontier as the SBM found. However, there exist other potential facets for evaluating DMUs. Therefore we propose Variation II that evaluates each DMU from all facets. We then employ clustering methods to classify DMUs into several groups, and apply Variation II within each cluster. This Variation III gives more reasonable efficiency scores with less effort. Lastly we propose a random search method (Variation IV) for reducing the burden of enumeration of facets. The results are approximate but practical in usage.
  • Article
    Full-text available
    In most models of Data Envelopment Analysis (DEA), the best performers have the full efficient status denoted by unity (or 100%), and, from experience, we know that usually plural Decision Making Units (DMUs) have this “efficient status”. To discriminate between these efficient DMUs is an interesting subject. This paper addresses this “super-efficiency” issue by using the slacks-based measure (SBM) of efficiency, which the author proposed in his previous paper [European Journal of Operational Research 130 (2001) 498]. The method differs from the traditional one based on the radial measure, e.g. Andersen and Petersen model, in that the former deals directly with slacks in inputs/outputs, while the latter does not take account of the existence of slacks. We will demonstrate the rationality of our approach by comparing it with the radial measure of super-efficiency. The proposed method will be particularly useful when the number of DMUs are small compared with the number of criteria employed for evaluation.
  • Article
    Efficiency measurement is usually based on the assumption that inputs have to be minimized and outputs have to be maximized. In a growing number of applications, however, undesirable outputs are incorporated into the production model which have to be minimized. In this paper various approaches for treating such outputs in the framework of Data Envelopment Analysis (DEA) are discussed and the resulting efficient frontiers are compared. New radial measures are introduced which assume that any change of the output level will involve both undesirable and desirable outputs.
  • Article
    This article presents a general framework for dynamic environmental performance analysis by generalizing the approach proposed by Kuosmanen and Kortelainen [Kuosmanen, T., Kortelainen, M., 2005. Measuring Eco-Efficiency of Production with Data Envelopment Analysis. Journal of Industrial Ecology 9(4), 59–72.] from a static to a dynamic setting. For this purpose we construct an environmental performance index (EPI) by applying frontier efficiency techniques and a Malmquist index approach. Compared to other dynamic environmental productivity and efficiency analysis approaches based on these methods, our approach builds on the standard definition of eco-efficiency as it is presented in the ecological economics literature. Recognizing the importance to analyze the sources of environmental performance changes, we show how changes in overall environmental performance can be decomposed into changes in relative eco-efficiency and shifts in environmental technology, respectively. We apply the presented technique at the macro level to dynamic environmental performance analysis of 20 member states of the European Union in 1990–2003. According to the results, environmental technical change mostly explains the improvement in overall environmental performance, while relative eco-efficiency change has been minor for most countries during the sample period.
  • Article
    This paper provides a sketch of some of the major research thrusts in data envelopment analysis (DEA) over the three decades since the appearance of the seminal work of Charnes et al. (1978) [Charnes, A., Cooper, W.W., Rhodes, E.L., 1978. Measuring the efficiency of decision making units. European Journal of Operational Research 2, 429–444]. The focus herein is primarily on methodological developments, and in no manner does the paper address the many excellent applications that have appeared during that period. Specifically, attention is primarily paid to (1) the various models for measuring efficiency, (2) approaches to incorporating restrictions on multipliers, (3) considerations regarding the status of variables, and (4) modeling of data variation.
  • Article
    Full-text available
    During the last years, enormous attention has been given to the assessment and improvement of the performance of productive systems. Economic activities at the firm, industry, regional or national level are affected by the world-wide trend for improved performance. The growing competition and the recent recession have also forced many airlines to reduce costs and to improve productivity and efficiency. In this context, there are two types of modelling methods of efficiency measurement: a non parametric one, represented by Data Envelopment Analysis and a parametric one, represented by Stochastic Frontier Analysis. The main objective of this empirical study is to evaluate the operational performance of an Italian airline for the year 2007 by using these two alternative methodologies.
  • Article
    We model the performance of DMUs (decision-making units) using a two-stage network model. In the first stage of production DMUs use inputs to produce an intermediate output that becomes an input to a second stage where final outputs are produced. Previous black box DEA models allowed for non-radial scaling of outputs and inputs and accounted for slacks in the constraints that define the technology. We extend these models and build a performance measure that accounts for a network structure of production. We use our method to estimate the performance of Japanese banks, which use labor, physical capital, and financial equity capital in a first stage to produce an intermediate output of deposits. In the second stage, those deposits become an input in the production of loans and securities investments. The network estimates reveal greater bank inefficiency than do the estimates that treat the bank production process as a black box with all production taking place in a single stage.
  • Article
    This note clarifies issues concerning the relationship between directional distance functions and slacks-based measures of efficiency from our earlier paper.
  • Article
    In this paper we introduce a SBM (slacks-based measure) of efficiency based on directional distance functions. This measure is contrasted with the SBM due to Professor Tone [Tone, K., 2001. A slacks-based measure of efficiency in data envelopment analysis. European Journal of Operational Research 130, 498-509].
  • Article
    This paper introduces a Malmquist CO2 emission performance index (MCPI) for measuring changes in total factor carbon emission performance over time. The MCPI is derived by solving several data envelopment analysis models. Bootstrapping MCPI is proposed to perform statistical inferences on the MCPI results. Using the index the emission performance of the world's 18 top CO2 emitters from 1997 to 2004 is studied. The results obtained show that the total factor carbon emission performance of the countries as a whole improved by 24% over the period and this was mainly driven by technological progress. The results of a cross-country regression analysis to investigate the determinants of the resulting MCPI are presented.
  • Article
    Radial measures of efficiency estimated using linear programming (LP) methods can be biased since slack in the constraints defining the technology suggests that at least one input can be reduced, or one output can be expanded, even though a firm is deemed to be "technically efficient." In this paper, we propose a directional slacks-based measure of technical inefficiency to account for the potential of slack in technological constraints. When no such slacks exist, directional slacks-based inefficiency collapses to the directional technology distance function. Our proposed measure helps to generalize some of the existing slacks-based measures of inefficiency. We examine the financial services provided by Japanese cooperative Shinkin banks, and estimate their inefficiency during the period 2002-2005. This inefficiency declined slightly during the period. We thus propose that slack is an important source of inefficiency which is often not captured by the directional technology distance function.
  • Article
    Full-text available
    Shortage of human resource for health poses a major challenge to achieving the millennium development goals. Uganda is among the 57 countries with human resource shortage reaching critical level and the situation is worst at lower levels of the health system. The private-not-for-profit (PNFP) health sub-sector in Uganda complements government efforts to achieve the MDG, the second health sector strategic plan (HSSP II) and the health-related objectives of the poverty eradication plan (PEAP). The Uganda Catholic Medical Bureau coordinates the Roman Catholic health facilities network, one of the three PNFP networks in Uganda. This paper, presented at a conference organized by the Faculty of Health Sciences of Uganda Martyrs University in March 2007, looks at the HRH crisis as experienced by the UCMB network giving the trend, examining the reasons, the destinations of attritional cases and what the network is trying to do to improve human resource stability. The information is based on quarterly reports received by the bureau from its affiliated health facilities.
  • Article
    Lovell and Rouse (LR) have recently proposed a modification of the standard DEA model that overcomes the infeasibility problem often encountered in computing super-efficiency. In the LR procedure one appropriately scales up the observed input vector (scale down the output vector) of the relevant super-efficient firm thereby usually creating its inefficient surrogate. An alternative procedure proposed in this paper uses the directional distance function introduced by Chambers, Chung, and Fare and the resulting Nerlove-Luenberger (NL) measure of super-efficiency. The fact that the directional distance function combines features of both an input-oriented and an output-oriented model, generally leads to a more complete ranking of the observations than either of the oriented models. An added advantage of this approach is that the NL super-efficiency measure is unique and does not depend on any arbitrary choice of a scaling parameter. A data set on international airlines from Coelli, Perelman, and Griffel-Tatje (2002) is utilized in an illustrative empirical application.
  • Article
    This study investigates the relationship between environmental performance and productive efficiency in the United States electric utility industry before and after the 1990 Clean Air Act Amendments. Using Data Envelopment Analysis (DEA), cross-sectional examinations reveal lower polluting plants are more efficient than higher polluting plants. Longitudinal analyses indicate plants can simultaneously reduce pollution and increase relative efficiency. Collectively, these results are evidence that proactive environmental management can reduce environmental costs and thus, lends support for adopting an environmental cost management system.
  • Article
    This paper uses Data Envelopment Analysis to compute measures of the efficiency (relative to a frontier) in terms of the use of all inputs as well as for single inputs like CO(2) and energy for a sample of greenhouse firms in the Netherlands over the period 1991-1995. These efficiency measures are generated for different firms specialised in production of vegetables, flowers, and potplants and with different heating technologies. The empirical results indicate that firms use energy quite efficiently and are less efficient in terms of CO(2) emissions. Firms using conventional heating are overall less efficiently using energy and CO(2) than firms using more advanced heating technologies. Most differences in efficiency between firm types and firms using different heating technologies are statistically significant. Scale adjustments can provide an important contribution to further efficiency improvements.