Dynamic DEA: A slacks-based measure approach

Miki Tsutsui and Kaoru Tone
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Miki Tsutsui: Central Research Institute of Electric Power Industry
Kaoru Tone: National Graduate Institute for Policy Studies

No 08-13, GRIPS Discussion Papers from National Graduate Institute for Policy Studies

Abstract: In data envelopment analysis, there are several methods for measuring efficiency change over time, e.g. the window analysis and the Malmquist index. However, they usually neglect carry-over activities between consecutive two terms. These carry-overs play an important role in measuring the efficiency of decision making units in each term as well as over the whole terms based on the long-term viewpoint. Dynamic DEA model proposed by Färe and Grosskopf is the first innovative contribution for such purpose. In this paper we develop their model in the slacks-based measure (SBM) framework, called Dynamic SBM (DSBM). The SBM model is non-radial and can deal with inputs/outputs individually, contrary to the radial approaches that assume proportional changes in inputs/outputs. Furthermore, according to the characteristics of carry-overs, we classify them into four categories, i.e. desirable, undesirable, free and fixed. Desirable carry-overs correspond, for example, to profit carried forward and net earned surplus carried to the next term, while undesirable carry-overs include, for example, loss carried forward, bad debt and dead stock. Free and fixed carry-overs indicate, respectively, discretionary and non-discretionary ones. We develop Dynamic SBM models that can evaluate the overall efficiency of decision making units for the whole terms as well as the term efficiencies.

Keywords: DEA; Dynamic DEA; DSBM; Carry-over (search for similar items in EconPapers)
Pages: 28 pages
Date: 2008-11
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