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The Economic Meaning of Data Envelopment Analysis: a "Behavioral" Perspective

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  • Laurens Cherchye
  • Bram De Rock

Abstract

We reconsider the motivation of Data Envelopment Analysis (DEA), the non-parametrictechnique that is widely employed for analyzing productive efficiency in academia, the privatesector and the public sector. We first argue that the conventional engineering motivationof DEA can be problematic since it often builds on unverifiable production axioms. Wethen provide a dual viewpoint and highlight the `behavioral' interpretation of DEA models.We start from a specification of the production objectives while imposing minimal structureon the production possibilities, and construct tools to meaningfully quantify deviations ofobserved producer behavior from optimizing behavior. This brings to light the economicmeaning of DEA, provides guidelines for selecting the appropriate model in practical researchsettings, and prepares the ground for instituting new DEA models. We hope that our insightswill contribute to the further dissemination of DEA, and stimulate public sector applicationsof DEA that build on its behavioral interpretation.

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  • Laurens Cherchye & Bram De Rock, 2013. "The Economic Meaning of Data Envelopment Analysis: a "Behavioral" Perspective," Working Papers ECARES ECARES 2013-03, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:eca:wpaper:2013/137577
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    2. Matthias Staessens & Pieter Jan Kerstens & Johan Bruneel & Laurens Cherchye, 2019. "Data Envelopment Analysis and Social Enterprises: Analysing Performance, Strategic Orientation and Mission Drift," Journal of Business Ethics, Springer, vol. 159(2), pages 325-341, October.
    3. Rogge, Nicky & De Jaeger, Simon & Lavigne, Carolien, 2017. "Waste Performance of NUTS 2-regions in the EU: A Conditional Directional Distance Benefit-of-the-Doubt Model," Ecological Economics, Elsevier, vol. 139(C), pages 19-32.
    4. Halická, Margaréta & Trnovská, Mária, 2018. "The Russell measure model: Computational aspects, duality, and profit efficiency," European Journal of Operational Research, Elsevier, vol. 268(1), pages 386-397.

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    More about this item

    Keywords

    non-parametric production analysis; economic efficiency; DEA;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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