Estimating the Revenue Efficiency of Public Service Providersin the Presence of Demand Constraints

Hong Ngoc Nguyen (hongngoc.nguyen@uq.edu.au) and Christopher O’Donnell (c.odonnell@economics.uq.edu.au.)
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Hong Ngoc Nguyen: School of Economics and Centre for Efficiency and Productivity Analysis (CEPA) at The University of Queensland, Australia
Christopher O’Donnell: School of Economics and Centre for Efficiency and Productivity Analysis (CEPA) at The University of Queensland, Australia
Authors registered in the RePEc Author Service: Christopher John O'Donnell

No WP032022, CEPA Working Papers Series from University of Queensland, School of Economics

Abstract: Evaluating the performance of public service providers is often complicated by the fact that they must choose input levels before demands for their services are known. We consider an even more complicated situation in which service providers have no opportunity to directly influence demands. This means that their predetermined inputs may be more than what is required to meet realised demands. In such cases, conventional measures of revenue efficiency used in the operational research literature will generally mis-classify rational and efficient managers as inefficient. We develop a more appropriate measure of revenue efficiency that accounts for exogenously-determined demands. We explain how data envelopment analysis (DEA) methods can be used to estimate our measure, and also how they can be used to assess the consequences (if any) of providers having to choose input levels before demands are known. The methodology is applied to hospital and health service (HHS) providers in Queensland (Australia). We obtain estimates of revenue efficiency that are quite different from estimates obtained using a conventional approach. Our results also indicate that HHS providers were not disadvantaged by having to choose input levels before demands were known.

Keywords: climate change; adaptive capacity; adaptation readiness; composite index; inequity (search for similar items in EconPapers)
JEL-codes: Q54 Q56 (search for similar items in EconPapers)
Date: 2022-05
New Economics Papers: this item is included in nep-eff
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Persistent link: https://EconPapers.repec.org/RePEc:qld:uqcepa:175

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