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Slacks-based inefficiency approach for general networks with bad outputs: An application to the banking sector

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  • Lozano, Sebastián

Abstract

In this paper the efficiency assessment of general networks of processes that produce both desirable and undesirable outputs is addressed. This problem arises in many contexts (e.g. transportation, energy generation, etc.). A general networks slacks-based inefficiency (GNSBI) measure can be computed using a simple linear program that takes into account the weak disposability of the bad outputs. The slacks-based inefficiency (SBI) of each process is also calculated. Target values for all inputs, outputs (both desirable and undesirable) and even intermediate products are also provided. The proposed approach is rather general and can accommodate many different network topologies and returns to scale assumptions. Two applications to the banking sector are presented: one to assess banks efficiencies and another to assess bank branches.

Suggested Citation

  • Lozano, Sebastián, 2016. "Slacks-based inefficiency approach for general networks with bad outputs: An application to the banking sector," Omega, Elsevier, vol. 60(C), pages 73-84.
    • Handle: RePEc:eee:jomega:v:60:y:2016:i:c:p:73-84
    DOI: 10.1016/j.omega.2015.02.012
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