GRIPS 政策研究センター Policy Research Center


Dec 1, 2007 Report No:07-09

Separation of uncontrollable factors and time shift effects from DEA scores

  • Miki Tsutsui Central Research Institute of Electric Power Industry
  • Tone KaoruGRIPS
Field Multi Disciplinary policy studies
Language English

It has been pointed out that DEA scores may be influenced by several external
environmental factors, which are uncontrollable for DMUs. It implies that the DEA
efficiency score without data adjustment might be biased and impractical for measuring
genuine management efficiency. Therefore it is essential to eliminate uncontrollable
effects from DEA scores and evaluate “pure” managerial efficiency for DMUs.
In an effort to solve this problem, we employ a multi-stage data adjustment procedure
using DEA and regression models, which is originally proposed by Fried et al. [1999]
consisting of four stages. In this study, we further modify this procedure by introducing
newly developed devices in each stage; Connected Slacks-Based Measure (CSBM)
model at the first and fourth stages, the Tobit model with DMU dummies at the second
stage, and a data tuning procedure at the third stage. Then we decompose the technical
inefficiency into three factors, i.e. environmental effects, time shift effects and pure
technical inefficiency. Lastly, we apply this procedure to the electric power utilities in
Japan and the US and compare their pure technical efficiency and causes of inefficiency.

Keywords data envelopment analysis, data adjustment, electric utilities, multi-stage
attachment 07-09.pdf