Ranking production units by their impact on structural efficiency

abstract

League tables associated with various forms of service activities from schools to hospitals illustrate a public need for ranking institutions by their productive performance. We present a new approach for ranking production units which is based on each unit’s marginal contribution in terms of structural efficiency. The approach is radically different from conventional methods based on super-efficiency indexes in Data Envelopment Analysis. We illustrate the mechanics of our method by numerical examples as well as an empirical illustration. We further demonstrate that our new indexes inherit all relevant and desirable properties of the Farrell efficiency index upon which they are constructed.

Keywords:

• Data envelopment analysis
• ranking
• marginal efficiency contribution
• structural efficiency
• super efficiency

Acknowledgements

The authors wish to thank two anonymous referees, Mette Asmild, Niels Christian Petersen and Ole B. Olesen for their constructive comments on earlier versions of this paper.

Notes

No potential conflict of interest was reported by the authors.

Additional information

Funding

Ghiyasi thanks the Centre of Health Economics Research (COHERE), Department of Business and Economics, University of Southern Denmark for their financial support. Zhu gratefully acknowledges financial supports from the National Natural Science Foundation of China [grant number 71703040].