Technical efficiency bias in data envelopment analysis caused by intra-output aggregation

Darold T. Barnum and John M. Gleason

Applied Economics Letters, 2007, vol. 14, issue 9, 623-626

Abstract: We show that an organization's technical efficiency scores are biased downward by linear aggregation of the quantities of the same type of output that are produced by multiple subunits (intra-output aggregation). We expand the models of Fare et al. (2002, 2004) and Barnum and Gleason (2005) to account for intra-output aggregation bias, yielding an expanded model in which technical efficiency is unbiased by any type of input or output aggregation. We illustrate intra-output aggregation bias with data envelopment analysis results from Canadian paratransit operations.

Date: 2007
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DOI: 10.1080/13504850500461647

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