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A generalized directional distance function in data envelopment analysis and its application to a cross-country measurement of health efficiency

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  • Cheng, Gang
  • Zervopoulos, Panagiotis

Abstract

Economic activity produces not only desirable outputs but also undesirable outputs that are usually called negative externalities in economic theory. Negative externalities are usually omitted from efficiency assessments (i.e., applications of Data Envelopment Analysis) which fail to express the true production process. In the present paper we develop a generalized directional distance function method for handling asymmetrically both desirable and undesirable outputs in the assessment process. Unlike the existing directional distance function-based approaches, the proposed method is units-invariant even in case assumptions for the direction vectors are relaxed. The new method is applied to data from national health systems of 160 countries. Desirable and undesirable outputs are incorporated to obtain a clear view of the efficiency status of the national health systems.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 42068.

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Date of creation: Jun 2012
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Handle: RePEc:pra:mprapa:42068

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Keywords: Data envelopment analysis; Directional distance function; Undesirable outputs; Units-invariant; Health systems;

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  1. Yang, Hongliang & Pollitt, Michael, 2009. "Incorporating both undesirable outputs and uncontrollable variables into DEA: The performance of Chinese coal-fired power plants," European Journal of Operational Research, Elsevier, vol. 197(3), pages 1095-1105, September.
  2. António Afonso & Miguel St. Aubyn, 2005. "Non-parametric approaches to education and health efficiency in OECD countries," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 227-246, November.
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