APPENDIX 3
Data Envelopment Analysis
Two variables are used to capture the performance of enterprises. This study uses a nonparametric frontier model—data envelopment analysis (DEA)—to measure the cost efficiency of an individual enterprise. The cost efficiency is further decomposed into two components: technical efficiency and allocative efficiency. On the basis of an input-saving efficiency measure, DEA is expressed as follows: S
Min θ s st
∑λ y s
is
> yis i = 1,..., m, s = 1,..., S,
is
≤ θs x is j = 1,..., n,
(C.1)
s =1 S
∑λ x s
s =1
S
λ i ≥ 0,
∑λ
s
=1
s =1
where q = efficiency score, representing the fraction by which an observation can multiply its input vector and still produce no less of any output, y = output vectors, x = input vectors, and l = intensity vector forming convex combinations of output vectors and input vectors. 163