IDEAS home Printed from https://ideas.repec.org/a/kap/jproda/v15y2001i3p201-215.html
   My bibliography  Save this article

FDH Directional Distance Functions with an Application to European Commercial Banks

Author

Listed:
  • Laurens Cherchye
  • Timo Kuosmanen
  • Thierry Post

Abstract

Weextend Free Disposable Hull (FDH) efficiency analysis towardsthe general directional distance function framework. The profitinterpretation of directional distance functions is extendedto the non-convex FDH technologies. In addition, we derive anefficient enumerative algorithm for computing distance measuresin Free Disposable Hull (FDH) technologies, which applies tothe entire (infinitely large) family of directional distancefunctions. A simple numerical example and an application to Europeancommercial banks illustrate the algorithm. Copyright Kluwer Academic Publishers 2001

Suggested Citation

  • Laurens Cherchye & Timo Kuosmanen & Thierry Post, 2001. "FDH Directional Distance Functions with an Application to European Commercial Banks," Journal of Productivity Analysis, Springer, vol. 15(3), pages 201-215, January.
    • Handle: RePEc:kap:jproda:v:15:y:2001:i:3:p:201-215
    DOI: 10.1023/A:1011176325187
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1023/A:1011176325187
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1023/A:1011176325187?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Henry Tulkens, 2006. "On FDH Efficiency Analysis: Some Methodological Issues and Applications to Retail Banking, Courts and Urban Transit," Springer Books, in: Parkash Chander & Jacques Drèze & C. Knox Lovell & Jack Mintz (ed.), Public goods, environmental externalities and fiscal competition, chapter 0, pages 311-342, Springer.
    2. Berger, Allen N. & Humphrey, David B., 1997. "Efficiency of financial institutions: International survey and directions for future research," European Journal of Operational Research, Elsevier, vol. 98(2), pages 175-212, April.
    3. Kuosmanen, Timo, 2001. "DEA with efficiency classification preserving conditional convexity," European Journal of Operational Research, Elsevier, vol. 132(2), pages 326-342, July.
    4. Fuss, Melvyn & McFadden, Daniel (ed.), 1978. "Production Economics: A Dual Approach to Theory and Applications," Elsevier Monographs, Elsevier, edition 1, number 9780444850133.
    5. Chavas, Jean-Paul & Cox, Thomas L., 1999. "A Generalized Distance Function And The Analysis Of Production Efficiency," Staff Papers 12601, University of Wisconsin-Madison, Department of Agricultural and Applied Economics.
    6. Rajiv D. Banker, 1993. "Maximum Likelihood, Consistency and Data Envelopment Analysis: A Statistical Foundation," Management Science, INFORMS, vol. 39(10), pages 1265-1273, October.
    7. Fuss, Melvyn & McFadden, Daniel, 1978. "Production Economics: A Dual Approach to Theory and Applications (II): Applications of the Theory of Production," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, volume 2, number fuss1978a.
    8. Merja Halme & Tarja Joro & Pekka Korhonen & Seppo Salo & Jyrki Wallenius, 1999. "A Value Efficiency Approach to Incorporating Preference Information in Data Envelopment Analysis," Management Science, INFORMS, vol. 45(1), pages 103-115, January.
    9. W. Briec, 1997. "A Graph-Type Extension of Farrell Technical Efficiency Measure," Journal of Productivity Analysis, Springer, vol. 8(1), pages 95-110, March.
    10. Jean-Paul Chavas & Thomas L. Cox, 1999. "A Generalized Distance Function and the Analysis of Production Efficiency," Southern Economic Journal, John Wiley & Sons, vol. 66(2), pages 294-318, October.
    11. Kuosmanen, Timo & Post, Thierry, 2001. "Measuring economic efficiency with incomplete price information: With an application to European commercial banks," European Journal of Operational Research, Elsevier, vol. 134(1), pages 43-58, October.
    12. Fuss, Melvyn & McFadden, Daniel, 1978. "Production Economics: A Dual Approach to Theory and Applications (I): The Theory of Production," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, volume 1, number fuss1978.
    13. Robert Thrall, 1999. "What Is the Economic Meaning of FDH?," Journal of Productivity Analysis, Springer, vol. 11(3), pages 243-250, June.
    14. Laurens Cherchye & Timo Kuosmanen & Thierry Post, 2000. "What Is the Economic Meaning of FDH? A Reply to Thrall," Journal of Productivity Analysis, Springer, vol. 13(3), pages 263-267, May.
    15. Kittelsen,S.A.C., 1999. "Monte Carlo simulations of DEA efficiency measures and hypothesis tests," Memorandum 09/1999, Oslo University, Department of Economics.
    16. Francisco Pedraja-Chaparro & Javier Salinas-Jimenez & Peter Smith, 1997. "On the Role of Weight Restrictions in Data Envelopment Analysis," Journal of Productivity Analysis, Springer, vol. 8(2), pages 215-230, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Keshvari, Abolfazl & Kuosmanen, Timo, 2013. "Stochastic non-convex envelopment of data: Applying isotonic regression to frontier estimation," European Journal of Operational Research, Elsevier, vol. 231(2), pages 481-491.
    2. S Blancard & J-P Boussemart & H Leleu, 2011. "Measuring potential gains from specialization under non-convex technologies," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 62(10), pages 1871-1880, October.
    3. Kristiaan Kerstens & Ignace Van de Woestyne, 2018. "Enumeration algorithms for FDH directional distance functions under different returns to scale assumptions," Annals of Operations Research, Springer, vol. 271(2), pages 1067-1078, December.
    4. Kristof De Witte & Elbert Dijkgraaf, 2007. "Mean and Bold?," Tinbergen Institute Discussion Papers 07-092/3, Tinbergen Institute.
    5. Walter Briec & Kristiaan Kerstens, 2006. "Input, output and graph technical efficiency measures on non-convex FDH models with various scaling laws: An integrated approach based upon implicit enumeration algorithms," TOP: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer;Sociedad de Estadística e Investigación Operativa, vol. 14(1), pages 135-166, June.
    6. Kevork, Ilias S. & Pange, Jenny & Tzeremes, Panayiotis & Tzeremes, Nickolaos G., 2017. "Estimating Malmquist productivity indexes using probabilistic directional distances: An application to the European banking sector," European Journal of Operational Research, Elsevier, vol. 261(3), pages 1125-1140.
    7. Ravelojaona, Paola, 2019. "On constant elasticity of substitution – Constant elasticity of transformation Directional Distance Functions," European Journal of Operational Research, Elsevier, vol. 272(2), pages 780-791.
    8. Yagi, Michiyuki & Hidemichi, Fujii & Hoang, Vincent & Managi, Shunsuke, 2015. "Environmental efficiency of energy, materials, and emissions," MPRA Paper 65358, University Library of Munich, Germany.
    9. Mercedes Beltrán-Esteve & José Gómez-Limón & Andrés Picazo-Tadeo & Ernest Reig-Martínez, 2014. "A metafrontier directional distance function approach to assessing eco-efficiency," Journal of Productivity Analysis, Springer, vol. 41(1), pages 69-83, February.
    10. Maryam Hasannasab & Dimitris Margaritis & Christos Staikouras, 2019. "The financial crisis and the shadow price of bank capital," Annals of Operations Research, Springer, vol. 282(1), pages 131-154, November.
    11. Cherchye, L. & Post, G.T., 2001. "Methodological Advances in Dea," ERIM Report Series Research in Management ERS-2001-53-F&A, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    12. Ching-Ren Chiu & Ming-Chung Chang & Jin-Li Hu, 2022. "Energy intensity improvement and energy productivity changes: an analysis of BRICS and G7 countries," Journal of Productivity Analysis, Springer, vol. 57(3), pages 297-311, June.
    13. Leleu, Herve, 2006. "A linear programming framework for free disposal hull technologies and cost functions: Primal and dual models," European Journal of Operational Research, Elsevier, vol. 168(2), pages 340-344, January.
    14. H Leleu, 2009. "Mixing DEA and FDH models together," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 60(12), pages 1730-1737, December.
    15. K De Witte & E Dijkgraaf, 2010. "Mean and bold? On separating merger economies from structural efficiency gains in the drinking water sector," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 61(2), pages 222-234, February.
    16. Ang, Frederic & Kerstens, Pieter Jan, 2017. "Decomposing the Luenberger–Hicks–Moorsteen Total Factor Productivity indicator: An application to U.S. agriculture," European Journal of Operational Research, Elsevier, vol. 260(1), pages 359-375.
    17. Mohsen Afsharian & Heinz Ahn, 2015. "The overall Malmquist index: a new approach for measuring productivity changes over time," Annals of Operations Research, Springer, vol. 226(1), pages 1-27, March.
    18. Qianying JIN & Kristiaan KERSTENS & Ignace VAN DE WOESTYNE, 2023. "Convex and Nonconvex Nonparametric Frontier-based Classification Methods for Anomaly Detection," Working Papers 2023-EQM-01, IESEG School of Management.
    19. Víctor M. Giménez García, 2004. "Un modelo FDH para la medida de la eficiencia en costes de los departamentos universitarios," Hacienda Pública Española / Review of Public Economics, IEF, vol. 168(1), pages 69-92, march.
    20. Maria Silva Portela & Pedro Borges & Emmanuel Thanassoulis, 2003. "Finding Closest Targets in Non-Oriented DEA Models: The Case of Convex and Non-Convex Technologies," Journal of Productivity Analysis, Springer, vol. 19(2), pages 251-269, April.
    21. Agustin Carstens & Luis I. Jacome H., 2005. "Latin American Central Bank Reform: Progress and Challenges," Macroeconomics 0509022, University Library of Munich, Germany.
    22. Laurens Cherchye & Tom Van Puyenbroeck, 2001. "Technical Efficiency Evaluation: Naturally Dual!," Public Economics Working Paper Series wptchff, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Working Group Public Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. R H Green & W D Cook, 2004. "A free coordination hull approach to efficiency measurement," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 55(10), pages 1059-1063, October.
    2. Timo Kuosmanen, 2003. "Duality Theory of Non-convex Technologies," Journal of Productivity Analysis, Springer, vol. 20(3), pages 273-304, November.
    3. W. Briec & K. Kerstens, 2009. "Infeasibility and Directional Distance Functions with Application to the Determinateness of the Luenberger Productivity Indicator," Journal of Optimization Theory and Applications, Springer, vol. 141(1), pages 55-73, April.
    4. Dalton, Timothy J., 2004. "Indivisible And Spatial Components Of Dairy Firm Efficiency," 2004 Annual meeting, August 1-4, Denver, CO 20320, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Briec, Walter & Dumas, Audrey & Kerstens, Kristiaan & Stenger, Agathe, 2022. "Generalised commensurability properties of efficiency measures: Implications for productivity indicators," European Journal of Operational Research, Elsevier, vol. 303(3), pages 1481-1492.
    6. Cherchye, L. & Post, G.T., 2001. "Methodological Advances in Dea," ERIM Report Series Research in Management ERS-2001-53-F&A, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    7. Kuosmanen, Timo, 2001. "DEA with efficiency classification preserving conditional convexity," European Journal of Operational Research, Elsevier, vol. 132(2), pages 326-342, July.
    8. Laurens Cherchye & Timo Kuosmanen & Thierry Post, 2000. "What Is the Economic Meaning of FDH? A Reply to Thrall," Journal of Productivity Analysis, Springer, vol. 13(3), pages 263-267, May.
    9. Arnaud Abad, 2020. "Environmental Efficiency and Productivity Analysis," Working Papers hal-03032038, HAL.
    10. Elvira Silva & Alfons Oude Lansink, 2013. "Dynamic Efficiency Measurement: A Directional Distance Function Approach," CEF.UP Working Papers 1307, Universidade do Porto, Faculdade de Economia do Porto.
    11. Walter Briec & Kristiaan Kerstens & Philippe Venden Eeckaut, 2004. "Non-convex Technologies and Cost Functions: Definitions, Duality and Nonparametric Tests of Convexity," Journal of Economics, Springer, vol. 81(2), pages 155-192, February.
    12. Brandon Pope & Andrew Johnson, 2013. "Returns to scope: a metric for production synergies demonstrated for hospital production," Journal of Productivity Analysis, Springer, vol. 40(2), pages 239-250, October.
    13. Kristiaan Kerstens & Ignace Van de Woestyne, 2021. "Cost functions are nonconvex in the outputs when the technology is nonconvex: convexification is not harmless," Annals of Operations Research, Springer, vol. 305(1), pages 81-106, October.
    14. Cherchye, Laurens & De Rock, Bram & Hennebel, Veerle, 2014. "The economic meaning of Data Envelopment Analysis: A ‘behavioral’ perspective," Socio-Economic Planning Sciences, Elsevier, vol. 48(1), pages 29-37.
    15. Víctor M. Giménez García, 2004. "Un modelo FDH para la medida de la eficiencia en costes de los departamentos universitarios," Hacienda Pública Española / Review of Public Economics, IEF, vol. 168(1), pages 69-92, march.
    16. Cherchye, Laurens & Kuosmanen, Timo & Post, Thierry, 2002. "Non-parametric production analysis in non-competitive environments," International Journal of Production Economics, Elsevier, vol. 80(3), pages 279-294, December.
    17. Dairo Estrada & Poldy Osorio, 2004. "Effects of Financial Capital on Colombian Banking Efficiency," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 22(47), pages 162-201, December.
    18. Silva, Elvira & Lansink, Alfons Oude & Stefanou, Spiro E., 2015. "The adjustment-cost model of the firm: Duality and productive efficiency," International Journal of Production Economics, Elsevier, vol. 168(C), pages 245-256.
    19. Timo Kuosmanen & Thierry Post, 2002. "Nonparametric Efficiency Analysis under Price Uncertainty: A First-Order Stochastic Dominance Approach," Journal of Productivity Analysis, Springer, vol. 17(3), pages 183-200, May.
    20. Kuosmanen, Timo & Post, Thierry, 2001. "Measuring economic efficiency with incomplete price information: With an application to European commercial banks," European Journal of Operational Research, Elsevier, vol. 134(1), pages 43-58, October.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:jproda:v:15:y:2001:i:3:p:201-215. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.