Efficiency and Productivity Analysis from a System Perspective:Historical Overview
Antonio Peyrache () and
Maria Silva ()
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Antonio Peyrache: School of Economics and Centre for Efficiency and Productivity Analysis (CEPA) at The University of Queensland, Australia, http://www.uq.edu.au/economics/
No WP042021, CEPA Working Papers Series from University of Queensland, School of Economics
A government faces the problem of allocating efficiently resources (factors of production or expenditure) to individual hospitals. In doing so, the government decides the quantity of resources that go to each single hospital and then leaves the decision on how to best use these resources to the hospital manager. The hospital manager will face the problem of allocating efficiently the resources she is given among the different departments of the hospital (i.e. cardiology, radiology, etc.) and she leaves the decision on how to best use these resources to the department head. Within each department, the head of the department decides how to allocate the resources she is given in order to service patients. What we just described is a multi-level parallel production network. To our surprise, such a system has been described mathematically (and in words) for the first time by Kantorovich (1939)and subsequently independently proposed by Koopmans (1951) and Johansen (1972). The problems of allocation of resources within the system and the measures of efficiency used by these early authors are astonishingly similar to the very recent literature on Network Data Envelopment Analysis (NDEA). NDEA witnessed exponential growth in the last decade. This prompted us to go deeper into the study of this _eld of research. In this chapter we review these early contributions in order to grasp a better understanding of the system approach to productivity and efficiency analysis. This topic has been quite neglected in the three decades going from the end of the '70 to the beginning of this century. The by-product of such a neglect is that in the last 10 to 20 years a lot of effort went into re-discovering the basic production structure described by Kantorovich, Koopmans and Johansen. The aim of this chapter is to make justice of the early contributions of these authors in view of the recent developments of system thinking in efficiency and productivity analysis. In the conclusion of the chapter, after having explored historically the development of this field of research, we will propose a number of topics that we think are important for the future development of this field of study.
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