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Aggregating Farrell efficiencies without value data: The case of hospitals

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  • Färe, Rolf
  • Karagiannis, Giannis

Abstract

This paper provides an alternative approach for computing aggregation weights for Farrell-type efficiencies when value (revenue or cost) data are not available. This alternative approach relies on Shannon entropy, which has a central role in information theory, and provides an objective weighting that fully exploits the information of the data at hand. Its main advantages are that it is easy to implement and it is readily applicable in all cases. We illustrate the applicability of the proposed approach by analyzing aggregate performance measures (i.e., technical efficiency, scale efficiency and capacity utilization) for public hospitals in Greece. Compared with simple average measures, we found aggregate measures to be lower for technical inefficiency and higher for scale inefficiency and capacity utilization. We also found that Greek public hospitals with above average size tend to have below average technical inefficiency and vice versa while those with above average size tend to have above average scale inefficiency and capacity utilization rate and vice versa.

Suggested Citation

  • Färe, Rolf & Karagiannis, Giannis, 2022. "Aggregating Farrell efficiencies without value data: The case of hospitals," Socio-Economic Planning Sciences, Elsevier, vol. 84(C).
    • Handle: RePEc:eee:soceps:v:84:y:2022:i:c:s0038012122001884
    DOI: 10.1016/j.seps.2022.101393
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