Harold O. Fried

Accounting for environmental effects and statistical noise in data envelopment analysis

In this paper we propose a new technique for incorporating environmental effects and statistical noise into a producer performance evaluation based on data envelopment analysis (DEA). The technique involves a three-stage analysis. In the first stage, DEA is applied to outputs and inputs only, to obtain initial measures of producer performance. In the second stage, stochastic frontier analysis (SFA) is used to regress first stage performance measures against a set of environmental variables. This provides, for each input or output (depending on the orientation of the first stage DEA model), a three-way decomposition of the variation in performance into a part attributable to environmental effects, a part attributable to managerial inefficiency, and a part attributable to statistical noise. In the third stage, either inputs or outputs (again depending on the orientation of the first stage DEA model) are adjusted to account for the impact of the environmental effects and the statistical noise uncovered in the second stage, and DEA is used to re-evaluate producer performance. Throughout the analysis emphasis is placed on slacks, rather than on radial efficiency scores, as appropriate measures of producer performance. An application to nursing homes is provided to illustrate the power of the three-stage methodology.

Incorporating the Operating Environment Into a Nonparametric Measure of Technical Efficiency

The ability of a production unit to transform inputs into outputs is influenced by its technical efficiency and external operating environment. This paper introduces a nonparametric, linear programming, frontier procedure for obtaining a measure of managerial efficiency that controls for exogenous features of the operating environment. The approach also provides statistical tests of the effects of external conditions on the efficient use of each individual input (for an input oriented model) or for each individual output (for an output oriented model). The procedure is illustrated for a sample of nursing homes.

Evaluating the performance of US credit unions

Credit unions are small, cooperative, not-for-profit institutions, which distinguishes them from other financial intermediaries. In this study we conduct a performance evaluation of credit unions. The criteria respect the unique organizational and institutional features of credit unions, without losing sight of the fact that they must compete with other financial intermediaries. We use nonparametric, nonstochastic techniques to measure performance, and we use parametric, stochastic techniques to attribute performance variation to features of credit unions and their operating environment. Our sample consists of two-thirds of all active credit unions in 1990.

The impact of mergers on credit union service provision

Abstract In this paper we conduct an empirical exercise in which we attempt to provide answers to three questions concerning credit union mergers: (i) do members of acquiring credit unions benefit from mergers?; (ii) do members of acquired credit unions benefit from mergers?; and (iii) what are the characteristics of relatively successful, and relatively unsuccessful, mergers? Our empirical exercise is based on annual samples of nearly 6000 credit unions, including nearly 300 merger participants, during the 1988–1995 period. We find member service provision to have improved in acquired credit unions, and to have been unchanged in acquiring credit unions. We also provide three separate analyses, from three different perspectives, of the role of various characteristics of merging credit unions in determining the success of mergers.

Evaluating the performance of professional golfers on the PGA, LPGA and SPGA tours

Abstract Data envelopment analysis is used to evaluate the performance of golfers on the three tours in the United States––the Professional Golf Association, the Ladies Professional Golf Association and the Senior Professional Golf Association (SPGA). The decision making unit is the individual golfer. The data is for the 1998 season. Two indexes are obtained for the golfers––a performance under pressure index and an athletic ability performance index. In addition, the inputs of the golfers are evaluated using several different techniques to determine the relative importance of each. Sam Snead asserted, “drive for show, putt for dough.” This issue is investigated and resolved.

Measuring Efficiencies of Academic Departments within a College

Abstract Technical and allocative efficiencies of 26 academic departments in the College of Agriculture and Life Sciences at Cornell University are computed using Data Envelopment Analysis over 2004/05. Allocations of faculty time between teaching, research, and extension vary by department and are used as unique prices in calculating allocative efficiencies. Departments not only vary in ability to convert inputs into outputs, but some also produce an incorrect mix of outputs given the prices placed on the outputs of that department. Colleges and universities can use this approach to evaluate and to adjust the performance of departments.

Enhancing The Performance of Credit Unions: The Evolution of a Methodology

In the United States credit unions are not-for-profit cooperative financial institutions, owned by and operated for the benefit of their members. Being part of a cooperative movement enhances the likelihood that credit unions will share performance-enhancing ideas, for the benefit of weak credit unions and the movement as a whole. In this paper we show how a conventional performance evaluation methodology has evolved into a novel performance enhancement methodology. The evolution of the methodology is the result of cooperations among individual credit union managements, movement officials and the authors. The evolution is illustrated with 1990 data on nearly 9,000 credit unions.

National ownership requirements and transfer pricing

Abstract This paper examines the interaction between a national ownership requirement and transfer pricing. It turns out that where indigenization implies managerial control by domestic owners, it may result in greater retained profits and a more intensive use of domestic resources.

Productive, Scale And Scope Efficiencies In U.S. Hospital-Based Nursing Homes

AbstractExcessive costs may be attributable to inefficiencies in production, non-optimal scale and diseconomies of scope. This paper calculates these three components of excess costs for a sample of U.S. hospital-based nursing homes using non-parametric methods. After adjusting for interstate regulatory and wage differences, we find evidence in support of all three sources of cost savings. Productive inefficiency is the most important, followed by non-optimal scale and diseconomies of scope.

The University Benchmarker: An Interactive Computer Approach

Although the role of universities in the knowledge society is increasingly significant, there remains a severe lack of systematic quantitative evidence at the micro-level, with virtually all policy discussion based on country level statistics or case studies. This book redresses the balance by examining original data from universities in six European countries – Italy, Norway, Portugal, Spain, Switzerland and the UK.