Hostname: page-component-78c5997874-s2hrs Total loading time: 0 Render date: 2024-11-11T02:53:41.205Z Has data issue: false hasContentIssue false
  • English
  • Français

Radial and Nonradial Technical Efficiency Measures on a DEA Reference Technology: A Comparison Using US Banking Data

Published online by Cambridge University Press:  17 August 2016

Gary D. Ferrier ,
Kristiaan Kerstens  and
Philippe Vanden Eeckaut
Gary D. Ferrier
Affiliation:
University of Arkansas
Kristiaan Kerstens
Affiliation:
Katholieke Universiteit Brussel
Philippe Vanden Eeckaut
Affiliation:
Université Catholique de Louvain
Get access

Summary

Technical efficiency measure can be classified as either radial or nonradial. While the theorical question of which is the better type of measure is unresolved, the radial measures enjoy much greater popularity than the nonradial measures in the empirical literature. To assess the impact of choice of measure, this paper offers an empirical comparison of one radial and three nonradial measures of technical efficiency, relative to a variable returns to scale DEA model with strong disposability. The distributions and ranking of these efficiency scores are examined for a sample of US banks.

Résumé

Résumé

Les mesures d’efficacité technique se répartissent en mesures radiales ou non radiales. La problématique de la supériorité d’une de ces mesures est toujours ouverte ; cependant la mesure radiale est, actuellement, la plus fréquemment utilisée dans la littérature empirique. Afin d’illustrer l’impact du choix de la mesure, ce papier propose une comparaison empirique où la mesure radiale est confrontée à trois mesures non radiales d’efficacité technique. Ces mesures sont appliquées à un modèle de type DEA à rendements d’échelle variables avec l’hypothèse de forte disposition. La distribution et le classement respectif de ces scores d’efficacité sont ainsi analysés pour un échantillon de banques américaines.

Keywords

D24D69J21D24D69J21
Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 60 , Issue 4 , December 1994 , pp. 449 - 479
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 1994 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Afriat, S. [1972], Efficiency Estimation of Production Functions, International Economic Review, 13(3), pp. 568–598.Google Scholar
Ali, A. and Seiford, L. [1993], The Mathematical Programming Approach to Efficiency Analysis, in Fried, H., Lovell, C.A.K. and Schmidt, S. (eds), The Measurement of Productive Efficiency: Techniques and Applications, Oxford, Oxford University Press, pp. 120–159.Google Scholar
Aly, H. Grabowski, R., Pasurka, C. and Rangan, N. [1990], Technical, Scale and Allocative Efficiencies in U..S. Banking: An Empirical Investigation, Review of Economics and Statistics, 72(2), pp. 211–218.Google Scholar
Banker, R., Charnes, A. and Cooper, W.W. [1984], Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis, Management Science, 30(9), pp. 1078–1092.Google Scholar
Berger, A., Hanweck, G. and Humphrey, D. [1987], Competitive Viability in Banking: Scale, Scope and Product Mix Economies, Journal of Monetary Economics, 20(3), pp. 501–520.Google Scholar
Berger, A. and Humphrey, D. [1991], The Dominance of Inefficiencies over Scale and Product Mix Economies in Banking, Journal of Monetary Economics, 28(1), pp. 117–148.Google Scholar
Berger, A., Hunter, W. and Timme, S. [1993], The Efficiency of Financial Institutions: A Review and Preview of Research Past, Present, and Future, Journal of Banking and Finance, 17(2-3), pp. 221–249.Google Scholar
Bessent, A., Bessent, W., Elam, J. and Clark, T. [1988], Efficiency Frontier Determination by Constrained Facet Analysis, Operations Research, 36(5), pp. 785–796.Google Scholar
Bol, G. [1986], On Technical Efficiency Measures: A Remark, Journal of Economic Theory, 38(2), pp. 380–385.Google Scholar
Charnes, A., Cooper, W., Golany, B., Seiford, L. and Stutz, J. [1985], Foundations of Data Envelopment Analysis for Pareto-Koopmans Efficient Empirical Production Frontiers, Journal of Econometrics, 30(1-2), pp. 91–107.Google Scholar
Charnes, A., Cooper, W. and Rhodes, E. [1978], Measuring the Efficiency of Decision Making Units, European Journal of Operational Research, 2(6), pp. 429–444.Google Scholar
Colwell, R. and Davis, E. [1992], Output and Productivity in Banking, Scandinavian Journal of Economics, 94(5), pp. 111–129.Google Scholar
De Borger, B., Ferrier, G. and Kerstens, K. [1994], The Choice of a Technical Efficiency Measure on the FDH: A Comparison Using US Banking Data, Fayetteville, University of Arkansas (Bureau of Business and Economic Research, Faculty Working Paper n° 94–403).Google Scholar
Debreu, G. [1951], The Coefficient of Resource Utilization, Econometrica, 19(3), pp. 273–292.Google Scholar
Deller, S. and Nelson, C. [1991], Measuring the Economic Efficiency of Producing Rural Road Services, American Journal of Agricultural Economics, 72(1), pp. 194–201.Google Scholar
Färe, R. [1975], Efficiency and the Production Function, Zeitschrift fur Nationalökonomie, 35(3-4), pp. 317–324.Google Scholar
Färe, R., Grosskopf, S. and Lovell, C.A.K. [1985], The Measurement of Efficiency of Production, Boston, Kluwer.Google Scholar
Färe, R. and Hunsaker, W. [1986], Notions of Efficiency and their Reference Sets, Management Science, 32(2), pp. 237–243.Google Scholar
Färe, R. and Logan, J. [1992], The Rate of Return Regulated Version of Farrell Efficiency, International Journal of Production Economics, 27(1), pp. 161–165.Google Scholar
Färe, R. and Lovell, C.A.k. [1978], Measuring the Technical Efficiency of Production, Journal of Economic Theory, 19(1), pp. 150–162.Google Scholar
Färe, R., Lovell, C.A.K. and Zieschang, K. [1983], Measuring the Technical Efficiency of Multiple Output Production Technologies, in Eichhorn, W., Neumann, K., Shephard, R. (eds), Quantitative Studies on Production and Prices, Würzburg, Physica-Verlag, pp. 159–171.Google Scholar
Farrell, M. [1957], The Measurement of Productive Efficiency, Journal of the Royal Statistical Society, Series A, 120(3), pp. 253–281.Google Scholar
Ferrier, G.D. and Lovell, C.A.K. [1990], Measuring Cost Efficiency in Banking: Econometric and Linear Programming Evidence, Journal of Econometrics, 46(1-2), pp. 229–245.Google Scholar
Ferrier, G.D., Grosskopf, S., Hayex, K. and Yaisawarng, S. [1993], Economies of Diversification in the Banking Industry: A Frontier Approach, Journal of Monetary Economics, 31(2), pp. 229–249.Google Scholar
Fried, H., Lovell, C.A.k. and Vanden Eeckaut, P. [1993], Evaluating the Performance of U.S. Credit Unions, Journal of Banking and Finance, 17(2-3), pp. 251–265.Google Scholar
Grosskopf, S. [1986], The Role of the Reference Technology in Measuring Productive Efficiency, Economic Journal, 96(382), pp. 499–513.Google Scholar
Kerstens, K. and Vanden Eeckaut, P. [1994], Technical Efficiency Measures on DEA and FDH: A Reconsideration of the Axiomatic Literature, Louvain-la-Neuve, UCL (CORE), mimeo.Google Scholar
Koopmans, T. [1951], Analysis of Production as an Efficient Combination of Activities, in Koopmans, T. (ed), Activity Analysis of Production and Allocation, New Haven, Yale Univ. Press, pp. 33–97.Google Scholar
Kopp, R. [198la], Measuring the Technical Efficiency of Production: A Comment, Journal of Economic Theory, 25(3), pp. 450–452.Google Scholar
Kopp, R. [198lb], The Measurement of Productive Efficiency: A Reconsideration, Quarterly Journal of Economics, 96(3), pp. 477–503.Google Scholar
Lovell, C.A.K. [1993], Production Frontiers and Productive Efficiency, in Fried, H., Lovell, C.A.K. and Schmidt, S. (eds), The Measurement of Productive Efficiency: Techniques and Applications, Oxford, Oxford Univ. Press, pp. 3–67.Google Scholar
Lovell, C.A.K. and Schmidt, P. [1988], A Comparison of Alternative Approaches to the Measurement of Productive Efficiency, in Dogramaci, A, Färe, R. (eds), Applications of Modern Production Theory: Efficiency and Productivity, Boston, Kluwer, pp. 3–32.Google Scholar
Lovell, C.A.K. and Vanden Eeckaut, P. [1994], Frontier Tales: DEA and FDH, in Diewert, W., Spremann, K., Stehlings, F. (eds), Mathematical Modelling in Economics: Essays in Honor of Wolfgang Eickhorn, Berlin, Springer, pp.446–457.Google Scholar
Petersen, N. [1990], A Note on the Relationship between the DEA and the Russell Input Efficiency Index, Odense, Odense Univ. (Dept. of Management n° 3/1990).Google Scholar
Russell, R. [1985], Measures of Technical Efficiency, Journal of Economic Theory, 35(1), pp. 109–126.Google Scholar
Russell, R. [1988], On the Axiomatic Approach to the Measurement of Technical Efficiency, in Eichhorn, W. (ed), Measurement in Economics, Heidelberg, Physica-Verlag, pp. 207–217.Google Scholar
Siegel, S. and Castellan, R. [1988], Nonparametric Statistics for the Behavioral Sciences, Second Edition, New York, McGraw-Hill.Google Scholar
Tulkens, H. [1993], On FDH Efficiency Analysis: Some Methodological Issues and Applications to Retail Banking, Courts, and Urban Transit, Journal of Productivity Analysis, 4(1-2), pp. 183–210.Google Scholar
Zieschang, K. [1984], An Extended Farrell Efficiency Measure, Journal of Economic Theory, 33(2), pp. 387–396.Google Scholar