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Non-Radial Directional Performance Measurement with Undesirable Outputs

Chen, Po-Chi and Yu, Ming-Miin and Chang, Ching-Cheng and Managi, Shunsuke (2014): Non-Radial Directional Performance Measurement with Undesirable Outputs.

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The objective of this paper is to provide a comprehensive efficiency measures to estimate the performances of OECD and non-OECD countries. A Russell directional distance function that appropriately credits the decision making unit not only for increase in desirable outputs but also for the decrease of undesirable outputs is derived from the proposed weighted Russell directional distance model. The method was applied to a panel of 99 countries over 1991 and 2003. This framework also decomposes the comprehensive efficiency measure into individual input/output components’ inefficiency scores that are useful for policy making. The results reveal that the OECD countries perform better than the non-OECD countries in overall, goods, labor and capital efficiencies, but worse in bad and energy efficiencies.

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