The relevance of DEA benchmarking information and the Least-Distance Measure

Authors:
Chulwoo Baek;Jeong-Dong Lee
Affiliations:
Institute of Economic Research, Hitotsubashi University, Naka 2-1, Kunitachi City, Tokyo, 186-8603, Japan;Techno-economics, Management and Policy Program, Seoul National University, Shillim-dong, Kwanak-gu, Seoul, 151-742, Republic of Korea
Venue:
Mathematical and Computer Modelling: An International Journal
Year:
2009

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Abstract

Efficiency analysis is performed not only to estimate the current level of efficiency, but also to provide information on how to remove inefficiency, that is, to obtain benchmarking information. Data Envelopment Analysis (DEA) was developed in order to satisfy both objectives and the strength of its benchmarking analysis gives DEA a unique advantage over other methodologies of efficiency analysis. This study proposes the use of the Least-Distance Measure in order to obtain the shortest projection from the evaluated Decision Making Unit (DMU) to the strongly efficient production frontier, thus allowing an inefficient DMU to find the easiest way to improve its efficiency. In addition to producing reasonable benchmarking information, the proposed model provides efficiency values which satisfy the general requirements that every well-defined efficiency measure should meet.