Performance measurement and joint production of intended and unintended outputs

The generation of unintended residuals when producing intended outputs is the key factor behind our serious problems with pollution. The way this joint production is modelled is therefore of crucial importance for our understanding and empirical efforts to change economic activities in order to reduce harmful residuals. Estimation of efficiency and productivity when producing both intended and unintended outputs has emerged as an important research strand. The most popular models in the field are based on weak disposability of the two types of outputs together and null-jointness introduced by Shephard. The purpose of the paper is to show that these model types are built on some questionable assumptions. An alternative model based on the production theory of Frisch introduces technical jointness for the case when the unintended output is unavoidable. The materials balance based on physical laws tells us that when material inputs are used unintended outputs are unavoidable. The modelling of joint production must therefore reflect this. The production of the two types of outputs occurs simultaneously. It is the maximisation of intended outputs for given inputs that engineers are striving at to achieve. The production functions for intended and unintended outputs are linked through common use of inputs. However, separate functions for the two types of output can be estimated because the intended outputs are independent of the unintended ones and vice versa, facilitating calculating separate efficiency and productivity measures using non-parametric DEA methods.

Dynamic Data Envelopment Analysis Model Involving Undesirable Outputs in the Electricity Power Generation Sector: The Case of Latin America and the Caribbean Countries

Studying the evolution of the efficiency of the electricity generation sector is a relevant task for policy makers, and requires the undesirable outputs derived from the activity to be considered in the evaluation. In this work, we propose a dynamic slack-based Data Envelopment Analysis (DEA) model that incorporates the assumption of weak disposability between the generation of electricity from fossil sources and the CO2 emissions caused by the sector to measure the technical efficiency of 24 Latin American and Caribbean countries in the period 2000–2016. The results show that, of the total number of countries studied, four are efficient overall, and four groupings of countries in relation to the levels of efficiency achieved are also identified. These results are important given that less-efficient countries can, through learning, increase their efficiency in electricity generation or emulate the future strategies proposed by the most efficient countries.

Modelling undesirable products in non-parametric performance analysis

Purpose The purpose of this paper is introducing an alternative model to measure the relative efficiency of observations with undesirable products. Describing the reference set and benchmarking. Design/methodology/approach In this paper, an alternative definition of weak disposability assumption is introduced to handle undesirable outputs. Actually, two types of undesirable outputs are addressed and a substitute definition of weak disposability is presented. Findings Using this assumption a linear production technology set along with a performance analysis model is constructed to assess the relative efficiency of the decision-making units. To illustrate the radial application of the proposed approach, a real case on transportation system of USA during 1992-2009 is given. Originality/value To date, data envelopment analysis studies have investigated undesirable outputs by the assumption of weak disposability, defined as the proportional contraction of good and bad products, which leads to the null-joint assumption between good and bad outputs. Therefore, the only way to produce no undesirable outputs is producing zero desirable outputs. So the production process should be stopped while it is not economically cost-effective. However, in some processes there are some undesirable outputs, which are decreased with non-same percentages. So these undesirable outputs can be stopped while the good outputs have a strictly positive value. In this situation, the good outputs are not null-joint with this type of bad outputs. In the current paper, a new definition of the weak disposability of outputs was represented while two groups of undesirable outputs were considered. Hence, desirable outputs and the first kind of undesirable outputs were decreased proportionally. However, the reduction value was different for the second kind of undesirable outputs. Hence, the null-joint assumption is removed from the production technology. Then, a new technology was proposed based on five postulates as inclusion of observations, free disposability of desirable outputs and inputs, new weak disposability, convexity and minimum extrapolation.

Efficiency of China’s Listed Securities Companies: Estimation through a DEA-Based Method

Accurate assessment of the efficiency of securities companies is of great significance to improve the competitiveness of companies, due to their increasingly important role in supporting economic development. As the main contribution, this paper proposes a novel efficiency estimation framework for securities companies based on data envelopment analysis (DEA), which takes into account operational risks and technical heterogeneity. First, the risk variable is incorporated in the evaluation system as an undesirable output through the setting of weak disposability. Subsequently, the meta-frontier model is introduced to consider the impact of the technical heterogeneity of different companies to improve the accuracy of the assessment. Furthermore, this article also provides the meta-frontier Malmquist model, which can be utilized to analyze in detail technological progress. Finally, the securities companies listed in the Chinese stock market were selected as samples for empirical analysis. The efficiency evaluation model for securities companies proposed in this paper will provide a reference for related evaluation issues.

Assessment of mixed network processes with shared inputs and undesirable factors

In the real world, there are processes whose structures are like a parallel-series mixed network. Network data envelopment analysis (NDEA) is one of the appropriate methods for assessing the performance of processes with these structures. In the paper, mixed processes with two parallel and series components are considered, in which the first component or parallel section consists of the shared in-puts, and the second component or series section consists of undesirable factors. By considering the weak disposability assumption for undesirable factors, a DEA approach as based on network slack-based measure (NSBM) is introduced to evaluate the performance of processes with mixed structures. The proposed model is illustrated with a real case study. Then, the model is developed to discriminate efficient units.

Comparative Analysis of Production Possibility Frontier in Measuring Social Efficiency with Data Envelopment Analysis: An Application to Airports

The environmental sustainability is a globally important issue, particularly in the global warming. There are many institutions and people who are interested in the greenhouse gases emissions issue and policies that attempt to improve the problem. The aviation industry is not an exception. Under this background, there has been much research on airport efficiency analysis, undesirable outputs, and on evaluating productivity with respect to environmental factors. In the efficiency analysis models with the undesirable outputs in the airports, there are two main types of production possibility frontiers. The first type is the frontier based on the Shephard technology, which involves a weak-disposability concept, using a single abatement factor. The second one is the frontier on the Lozano-Gutiérrez technology, which tries to take the weak disposability into account by regarding the undesirable outputs as input. However, they have limitations. Additionally, no study has provided how to apply weak disposability correctly. To find out the limitations and give standard to utilize weak disposability, we compare models with two issues that must be scrutinized. In this paper, we show that these two concepts have limitations in making the production possibility area. To overcome this limitation, we propose an undesirable-output model using multiple abatement factors based on weak disposability with the slack-based measure (SBM) approach. We analyze, comparatively, the different social efficiency performances according to two issues among the three approaches in estimating production possibility frontier, using the Shepard model, the Lozano-Gutierrez model, and our proposed model. To provide correct standard of measurement and apply characteristics of undesirable outputs, we study not only theoretically, but also empirically, with data from Korea’s 13 domestic airports.