Multi-period efficiency and Malmquist productivity index in two-stage production systems

Chiang Kao and Shiuh-Nan Hwang

European Journal of Operational Research, 2014, vol. 232, issue 3, 512-521

Abstract: Conventional two-stage data envelopment analysis (DEA) models measure the overall performance of a production system composed of two stages (processes) in a specified period of time, where variations in different periods are ignored. This paper takes the operations of individual periods into account to develop a multi-period two-stage DEA model, which is able to measure the overall and period efficiencies at the same time, with the former expressed as a weighted average of the latter. Since the efficiency of a two-stage system in a period is the product of the two process efficiencies, the overall efficiency of a decision making unit (DMU) in the specified period of time can be decomposed into the process efficiency of each period. Based on this decomposition, the sources of inefficiency in a DMU can be identified. The efficiencies measured from the model can also be used to calculate a common-weight global Malmquist productivity index (MPI) between two periods, in that the overall MPI is the product of the two process MPIs. The non-life insurance industry in Taiwan is used to verify the proposed model, and to explain why some companies performed unsatisfactorily in the specified period of time.

Keywords: Data envelopment analysis; Malmquist productivity index; Efficiency; Two-stage system; Parallel system (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (50)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:232:y:2014:i:3:p:512-521

DOI: 10.1016/j.ejor.2013.07.030

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