A universal solution for units-invariance in data envelopment analysis

Jin Xu, Panagiotis Zervopoulos, Zhenhua Qian and Gang Cheng

MPRA Paper from University Library of Munich, Germany

Abstract: The directional distance function model is a generalization of the radial model in data envelopment analysis (DEA). The directional distance function model is appropriate for dealing with cases where undesirable outputs exist. However, it is not a units-invariant measure of efficiency, which limits its accuracy. In this paper, we develop a data normalization method for DEA, which is a universal solution for the problem of units-invariance in DEA. The efficiency scores remain unchanged when the original data are replaced with the normalized data in the existing units-invariant DEA models, including the radial and slack-based measure models, i.e., the data normalization method is compatible with the radial and slack-based measure models. Based on normalized data, a units-invariant efficiency measure for the directional distance function model is defined.

Keywords: Data Envelopment Analysis; Data normalization; Units-invariance; Directional distance function (search for similar items in EconPapers)
JEL-codes: C02 C61 C67 D24 (search for similar items in EconPapers)
Date: 2012-09-29
New Economics Papers: this item is included in nep-eff
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