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

Author

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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.

Suggested Citation

  • Cheng, Gang & Zervopoulos, Panagiotis, 2012. "A generalized directional distance function in data envelopment analysis and its application to a cross-country measurement of health efficiency," MPRA Paper 42068, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:42068
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    File URL: https://mpra.ub.uni-muenchen.de/42068/1/MPRA_paper_42068.pdf
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    References listed on IDEAS

    as
    1. 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. 8, pages 227-246, November.
    2. Osman Zaim & Rolf Färe & Shawna Grosskopf, 2001. "An Economic Approach to Achievement and Improvement Indexes," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 56(1), pages 91-118, October.
    3. S. Grosskopf & S. Self & O. Zaim, 2006. "Estimating the efficiency of the system of healthcare financing in achieving better health," Applied Economics, Taylor & Francis Journals, vol. 38(13), pages 1477-1488.
    4. Podinovski, Victor V. & Kuosmanen, Timo, 2011. "Modelling weak disposability in data envelopment analysis under relaxed convexity assumptions," European Journal of Operational Research, Elsevier, vol. 211(3), pages 577-585, June.
    5. 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.
    6. Fare, Rolf, et al, 1989. "Multilateral Productivity Comparisons When Some Outputs Are Undesirable: A Nonparametric Approach," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 90-98, February.
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    More about this item

    Keywords

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

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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