Data Envelopment Analysis

The paper provides an overview of the different
approaches to measure returns-to-scale (RTS) in Data
Envelopment Analysis (DEA). DEA is a promising
approach allowing for analysis of efficiency and RTS
in certain fields where other concepts like
regression analysis are not applicable. Therefore,
DEA literature and especially literature on RTS
measurement in DEA is rapidly growing. Returns-to-
scale and scale efficiency can lead to significant
and long-lasting implications for management and
politics. Furthermore, RTS classification can be
used to decide on mergers and acquisitions.
Following the description of the most common DEA
models and their technology different approaches to
measure RTS are described and advantages and
disadvantages are elaborated. The approaches are
subdivided in qualitative and quantitative
approaches and RTS measurement in cost-based and non-
radial models. Additionally, sensitivity analysis
for RTS measurement is being dealt with. Finally, an
empirical application is provided to illustrate RTS
measurement approaches discussed in the paper.

Autorentext

Dr Bernhard Klemen graduated with distinction from Vienna University of Economics and Business Administration in Economics and Business Administration. His research focuses on economies of scale and scope measurement in Data Envelopment Analysis. Currently he is employed at Morgan Stanley.

Klappentext

The paper provides an overview of the different approaches to measure returns-to-scale (RTS) in Data Envelopment Analysis (DEA). DEA is a promising approach allowing for analysis of efficiency and RTS in certain fields where other concepts like regression analysis are not applicable. Therefore, DEA literature and especially literature on RTS measurement in DEA is rapidly growing. Returns-to-scale and scale efficiency can lead to significant and long-lasting implications for management and politics. Furthermore, RTS classification can be used to decide on mergers and acquisitions. Following the description of the most common DEA models and their technology different approaches to measure RTS are described and advantages and disadvantages are elaborated. The approaches are subdivided in qualitative and quantitative approaches and RTS measurement in cost-based and non-radial models. Additionally, sensitivity analysis for RTS measurement is being dealt with. Finally, an empirical application is provided to illustrate RTS measurement approaches discussed in the paper.