Developing a decomposable measure of profit efficiency using DEA

In for-profit organizations efficiency measurement with reference to the potential for profit augmentation is particularly important as is its decomposition into technical, and allocative components. Different profit efficiency approaches can be found in the literature to measure and decompose overall profit efficiency. In this paper, we highlight some problems within existing approaches and propose a new measure of profit efficiency based on a geometric mean of input/output adjustments needed for maximizing profits. Overall profit efficiency is calculated through this efficiency measure and is decomposed into its technical and allocative components. Technical efficiency is calculated based on a non-oriented geometric distance function (GDF) that is able to incorporate all the sources of inefficiency, while allocative efficiency is retrieved residually. We also define a measure of profitability efficiency which complements profit efficiency in that it makes it possible to retrieve the scale efficiency of a unit as a component of its profitability efficiency. In addition, the measure of profitability efficiency allows for a dual profitability interpretation of the GDF measure of technical efficiency. The concepts introduced in the paper are illustrated using a numerical example

Accounting for externalities in the measurement of productivity growth: The Malmquist cost productivity measure

This paper starts with the basic premise: that conventional measures of productivity growth-often used as a measure of corporate performance-which ignore external or social output, are biased. We then construct an alternative productivity growth measure using activity analysis which integrates the externality/social output into a generalized productivity measure reflecting social responsibility. This method is very general and could be applied to gauge corporate social responsibility. We provide an application to US agriculture to demonstrate the approach: We show that conventional measures of productivity are biased upward when production of negative externalities (or bad) outputs is increasing. Conversely, this same measure of productivity is biased downward when externalities in production are decreasing. © 2004 Elsevier B.V. All rights reserved

Do the home field, global advantage, and liability of unfamiliarness hypotheses hold? empirical evidence from Malaysia

The study explores the home field, global advantage, and liability of unfamiliarness hypotheses in the Malaysian banking sector. The results indicate that Malaysian banks have exhibited productivity progress mainly attributed to technological progress. The authors find negative relationship between foreign and government ownership and bank productivity. Likewise, the publicly listed banks have been relatively less productive compared to private banks, thus rejecting the market discipline hypothesis. The empirical findings suggest that foreign banks from the North American countries to be the least productive banking group lending support to the home field advantage and the limited form of the global advantage hypotheses

The role of energy productivity in US agriculture

This paper investigates the role of energy on U.S. agricultural productivity using panel data at the state level for the period 1960–2004.We first provide a historical account of energy use in U.S. agriculture. To do this we rely on the Bennet cost indicator to study how the price and volume components of energy costs have developed over time. We then proceed to analyze the contribution of energy to productivity in U.S. agriculture employing the Bennet–Bowley productivity indicator. An important feature of the Bennet–Bowley indicator is its direct association with the change in (normalized) profits. Thus our study is also able to analyze the link between profitability and productivity. Panel regression estimates indicate that energy prices have a negative effect on profitability in the U.S. agricultural sector. We also find that energy productivity has generally remained below total farm productivity following the 1973–1974 global energy crisis.Keywords: Agricultural productivity, Bennet-Bowley indicator, Energy productivit

Eco-efficiency measurement and material balance principle:an application in power plants Malmquist Luenberger Index

Incorporating Material Balance Principle (MBP) in industrial and agricultural performance measurement systems with pollutant factors has been on the rise in recent years. Many conventional methods of performance measurement have proven incompatible with the material flow conditions. This study will address the issue of eco-efficiency measurement adjusted for pollution, taking into account materials flow conditions and the MBP requirements, in order to provide ‘real’ measures of performance that can serve as guides when making policies. We develop a new approach by integrating slacks-based measure to enhance the Malmquist Luenberger Index by a material balance condition that reflects the conservation of matter. This model is compared with a similar model, which incorporates MBP using the trade-off approach to measure productivity and eco-efficiency trends of power plants. Results reveal similar findings for both models substantiating robustness and applicability of the proposed model in this paper

Productivity change in Nigerian seaports after reform: a Malmquist productivity index decomposition approach

During the 1990s, Nigerian seaports were considered inefficient, unsafe due to massive cargo theft (wharf rat phenomenon) and one of the most expensive port systems in the world. This resulted in long turnaround times for ships and increased container dwell times. As a result, port operations were transferred to the private sector through concession contracts. This paper employs a Malmquist productivity index (MPI) technique to benchmark pre-and post-reform total factor productivity growth of the six major Nigeria seaports (Apapa, Calabar, Onne, Port Harcourt, TinCan Island and Warri) for the period 2000–2011 which represents six years before (2000–2005) and six years after (2006–2011) the reform. The results indicate progress in technical efficiency of the ports after reform but deterioration in technological progress. Overall productivity growth was higher in the pre-concession period compared to the post-concession period. The source of pre-concession period productivity growth was technological progress while the change in productivity of the post-concession period is generated by an increase in scale efficiency. This suggests that concessionaires have not brought in the much anticipated investment in modern technology to drive port efficiency. The ports of Calabar and Apapa experienced the highest productivity growth while lowest result was Onne

Devolution dynamics of Spanish local government

Over the last few years, ther has been a devolutionary tendency in many developed and developing countries. In this article we propose a methodology to decompose whether the benefits in terms of effciency derived from transfers of powers from higher to municipal levels of government "the "economic dividend" of devolution) might increase over time. This methodology is based on linear programming approaches for effciency measurement. We provide anapplication to Spanish municipalities, which have had to adapt to both the European Stability and Growth Pact as well as to domestic regulation seeking local governments balanced budget. Results indicate that efficiency gains from enhaced decentralization have increased over time. However, the way through which these gains accrue differs across municipalities -in some cases technical change is the main component, whereas in others catching up dominates

A classification of DEA models when the internal structure of the Decision Making Units is considered

We classify the contributions of DEA literature assessing Decision Making Units (DMUs) whose internal structure is known. Starting from an elementary framework, we define the main research areas as shared flow, multilevel and network models, depending on the assumptions they are subject to. For each model category, the principal mathematical formulations are introduced along with their main variants, extensions and applications. We also discuss the results of aggregating efficiency measures and of considering DMUs as submitted to a central authority that imposes constraints or targets on them. A common feature among the several models is that the efficiency evaluation of the DMU depends on the efficiency values of its subunits thereby increasing the discrimination power of DEA methodology with respect to the black box approach

A branch and efficiency algorithm for the optimal design of supply chain networks

Supply chain operations directly affect service levels. Decision on amendment of facilities is generally decided based on overall cost, leaving out the efficiency of each unit. Decomposing the supply chain superstructure, efficiency analysis of the facilities (warehouses or distribution centers) that serve customers can be easily implemented. With the proposed algorithm, the selection of a facility is based on service level maximization and not just cost minimization as this analysis filters all the feasible solutions utilizing Data Envelopment Analysis (DEA) technique. Through multiple iterations, solutions are filtered via DEA and only the efficient ones are selected leading to cost minimization. In this work, the problem of optimal supply chain networks design is addressed based on a DEA based algorithm. A Branch and Efficiency (B&E) algorithm is deployed for the solution of this problem. Based on this DEA approach, each solution (potentially installed warehouse, plant etc) is treated as a Decision Making Unit, thus is characterized by inputs and outputs. The algorithm through additional constraints named “efficiency cuts”, selects only efficient solutions providing better objective function values. The applicability of the proposed algorithm is demonstrated through illustrative examples

Is eco-efficiency in greenhouse gas emissions converging among European Union countries?

Eco-efficiency refers to the ability to produce more goods and services with less impact on the environment and less consumption of natural resources. This issue has become a matter of concern that is receiving increasing attention from politicians, scientists and researchers. Furthermore, greenhouse gases emitted as a result of production processes have a marked impact on the environment and are also the foremost culprit of global warming and climate change. This paper assesses convergence in eco-efficiency in greenhouse gas emissions in the European Union. Eco-efficiency is assessed at both country and greenhouse-gas-specific levels using Data Envelopment Analysis techniques and directional distance functions, as recently proposed by Picazo-Tadeo et al. (Eur J Oper Res, 220:798–809, 2012). Convergence is then evaluated using the Phillips and Sul (Econometrica, 75:1771–1855, 2007) approach that allows testing for the existence of convergence groups. Although the results point to the existence of different convergence clubs depending on the specific pollutant considered, they signal the existence of at least four clear groups of countries. The first two groups are core European Union high-income countries (Benelux, Germany, Italy, Austria, the United Kingdom and Scandinavian countries). A third club is made up of peripheral countries (Spain, Ireland, Portugal and Greece) together with some Eastern countries (Latvia and Slovenia), while the remaining clubs consist of groups containing Eastern European countries