Estimating DEA technical and allocative inefficiency using aggregate cost or revenue data

Rajiv Banker (), Hsihui Chang () and Ram Natarajan ()

Journal of Productivity Analysis, 2007, vol. 27, issue 2, 115-121

Abstract: In this paper, we address the question of Data Envelopment Analysis (DEA) evaluation of efficiency when aggregate cost or revenue data must be used. We show that the DEA technical inefficiency measure using total revenues as the single output variable or total costs as the single input variable equals the aggregate technical and allocative inefficiency. We employ this result to estimate allocative inefficiency and construct statistical tests of the null hypothesis of no allocative inefficiency analogous to those of the null hypothesis of no scale inefficiency. We illustrate our method using revenue and personnel data for the top U.S. public accounting firms over 1995–1998. Our empirical results indicate the existence of statistically significant allocative inefficiency in the public accounting industry. Copyright Springer Science+Business Media, LLC 2007

Keywords: Data envelopment analysis; Aggregate cost data; Aggregate revenue data; Technical inefficiency; Allocative inefficiency; Public accounting; D24; L11; M41 (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (20)

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Persistent link: https://EconPapers.repec.org/RePEc:kap:jproda:v:27:y:2007:i:2:p:115-121

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DOI: 10.1007/s11123-006-0027-1

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