Author

  • G. Thomas Sav

    • Raj Soin College of Business Wright State University Dayton, USA
    • United States

Abstract

This paper estimates and compares operating efficiencies of publicly owned associate degree granting colleges in the United States using data envelopment analysis (DEA) and stochastic frontier analysis (SFA). Comparisons are based on panel data for 698 colleges over four academic years, 2005-09. Included are both constant and variable returns to scale DEA estimates along with half and truncated normal inefficiency SFA estimates. The values 0.56 vs. 0.45 represent the largest mean DEA-SFA efficiency differential. DEA results indicate that 13% of colleges are fully (100%) efficient while SFA puts that percentage at only 1.7%. Comparisons of rankings based on efficiency performance generated a weak 0.65 correlation. Encouragingly, despite the financial turmoil initiated by the global crisis, the findings indicate that colleges have managed large efficiency gains over the four-year period. By 2008-09, DEA estimated efficiency increased to approximately 60%. Given continuing reductions in higher education public funding and increasing interest in public management reforms, the results should be of both managerial and public policy interest.

Keywords

References

  • Aigner, D. J., Lowell, C. A. K. & Schmidt, P. (1977). Formulation and estimation of stochastic frontier production function models. Journal of Econometrics, 6(1), 21-37.
  • Banker, R. D., Charnes, A. & Cooper, W. W. (1984). Some models for estimating technical and scale inefficiencies in data envelopment analysis. Management Science, 30, 1078-1092.
  • Battese, G. E. & Coelli, T. J. (1992). Frontier production functions, technical efficiency and panel data: with application to paddy farmers in India. Journal of Productivity Analysis, 3(1/2), 153-169.
  • Bhandari, A. K. & Maiti, P. (2011). Efficiency of the Indian leather firms, some results obtained using the two conventional methods. Journal of Productivity Analysis , 37(1), 73-93.
  • Charnes, A., Cooper, W. W. & Rhodes, E. (1978). Measuring the efficiency of decision-making units. European Journal of Operational Research, 2(6), 425-444.
  • Coelli, T., Prasada, J. D., Rao, S., O’Donnell, C. J. & Battese, G. E. (2005). An Introduction to Efficiency and Productivity Analysis . Springer, New York.
  • Cook, W. D. & Zhu, J. (2008). Data Envelopment Analysis. Wade D. Cook and Joe Zhu.
  • Cooper, W., Seiford, L. & Tone, K. (2007). Data Envelopment Analysis, Springer, New York.
  • Emrouznejad, A., Parker, B. R. & Tavares, G. (2008). Evaluation of research in efficiency and productivity: A survey and analysis of the first 30 years of scholarly literature in DEA. Socio-Economic Planning Sciences , 42(3), 151-157.
  • Jacobs, R. (2001). Alternative methods to examine hospital efficiency, Data envelopment analysis and stochastic frontier analysis. Health Care Management Science, 4(2), 103-115.
  • Kumbhakar, S. C. & Lovell, C. A. K. (2003). Stochastic Frontier Analysis. Cambridge University Press, Cambridge..
  • Martin, J. C. & Roman, C. (2006). A benchmarking analysis of Spanish commercial airports. A comparison between SMOP and DEA ranking methods. Networks and Spatial Economics, 6(2 ), 111-134.
  • Meeusen, W. & van-den-Broech, J. (1977). Efficiency from Cobb-Douglas production functions with composed error. International Economic Review , 18(2), 435-444.
  • McMillan, M. L. & Chan, W. H. (2006). University efficiency, a comparison and consolidation of results from stochastic and non-stochastic methods. Education Economics, 14, 1-30.
  • Reinhard, S., Knox Lovell, C. A. & Thijssen, G. (1999). Econometric estimation of technical and environmental efficiency, an application to Dutch dairy farms. American Journal of Agricultural Economics , 81(1), 4460.
  • Sav, G. T. (2004). Higher education costs and scale and scope economies. Applied Economics , 36(6), 607-614.
  • Sav, G. T. (2012). Managing operating efficiencies of publicly owned universities: American university stochastic frontier estimates using panel data. Advances in Applied Economics and Management , 2(1), 1-23.
  • Sharma, K. R., Leung, P. & Zaleski, H. M. (1997). Productive efficiency of the swine industry in Hawaii, Stochastic frontier vs. data envelopment analysis. Journal of Productivity Analysis , 8, 447-459.
  • Theodoridis, A. M. & Psychoudakis, A. (2008). Efficiency measurement in Greek dairy farms, Stochastic Frontier vs. data envelopment analysis. International Journal of Economic Sciences and Applied Research, 1(2), 53-67.
  • Tingley, D., Pascoe, S. & Coglan, L. (2005). Factors affecting technical efficiency in fisheries, stochastic production frontier versus data envelopment analysis approaches. Fisheries Research 73, 363-376.
  • Wadud, A. & White, B. (2000). Farm household efficiency in Bangladesh, a comparison of stochastic frontier and DEA methods. Applied Economics, 32(13), 1665-1673.

Downloads

No downloads have been recorded for this article yet. Figures appear here once readers begin downloading the full text.

How to Cite

Sav, G. T. (2012). Efficiency Estimates and Rankings Employing Data Envelopment and Stochastic Frontier Analyses: Evaluating the Management of U.S. Public Colleges. Information Management and Business Review, 4(8), 444-452. https://doi.org/10.22610/imbr.v4i8.999

Share this article

License

Copyright (c) 2012 G. Thomas Sav (Author)

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

Author (s) should affirm that the material has not been published previously. It has not been submitted and it is not under consideration by any other journal. At the same time author (s) need to execute a publication permission agreement to assume the responsibility of the submitted content and any omissions and errors therein. After submission of revised paper in the light of suggestions of the reviewers, the editorial team  edits and formats manuscripts to bring uniformity and standardization in published material.

This work will be licensed under Creative Commons Attribution 4.0 International (CC BY 4.0) and under condition of the license, users are free to read, copy, remix, transform, redistribute, download, print, search or link to the full texts of articles and even build upon their work as long as they credit the author for the original work. Moreover, as per journal policy author (s) hold and retain copyrights without any restrictions.

Keywords

Section

Research Paper

Published in

Vol. 4 No. 8 (2012) Entrepreneurship, Efficiency & Customer Relations View issue contents

Published

2012-08-15

Submissions

Have research to publish? Information Management and Business Review welcomes submissions.

Make a Submission