Canonical correlation analysis and DEA for azorean agriculture efficiency

Abstract

In this paper we will document the application of canonical correlation analysis to variable aggregation using the correlations of the original variables with the canonical variates. A case study, about farms in Terceira Island, with a small data set is presented. In this data set of 30 farms we intend to use 17 input variables and 2 output variables to measure DEA efficiency. Without any data reduction procedure several problems known as “curse of dimensionality” are expected. With the data reduction procedures suggested it was possible to conclude quite acceptable and domain consistent conclusions.N/