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Decomposition of technical efficiency under fixed proportion technologies: an application of data envelopment analysis

Viera Mendelová ()
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Viera Mendelová: Matej Bel University Banská Bystrica

Journal of Productivity Analysis, 2022, vol. 57, issue 1, No 1, 22 pages

Abstract: Abstract The paper deals with the technical efficiency evaluation under the fixed proportion technologies (FPTs) assumption where nonsubstitutable inputs and outputs are present. The recent research has shown that the conventional data envelopment analysis (DEA) models used for FPTs are biased, and when inputs and outputs are not substituted for either technological or other reasons, the models that account for nonsubstitutability need to be employed. This paper discusses a technical efficiency decomposition under FPTs and proposes two new models for quantification of contribution of various sources to overall inefficiency. The first model, called the calculation-based model, is a purely parametric model for efficiency decomposition, whereas the second model, called the adjusted CCR model, is a combination of parametric and nonparametric DEA approach. Using the models presented in the paper, the overall efficiency measure is decomposed into three main components: Farrell efficiency component, input mix efficiency component and output mix efficiency component. The selected estimators, some of them newly developed, are compared with the true efficiency levels via Monte Carlo simulations to measure the accuracy of the models. The results demonstrate that the proposed models provide sufficiently reliable results and in terms of overall efficiency are comparable with existing models for measuring efficiency in FTP conditions.

Keywords: Efficiency measurement; Nonsubstitutable inputs; Nonsubstitutable outputs; Sources of technical inefficiency; Mix efficiency (search for similar items in EconPapers)
JEL-codes: C14 C61 D24 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s11123-021-00617-w

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