Chapter 12 New uses of DEA and statistical regressions for efficiency evaluation and estimation — with an illustrative application to public secondary schools in Texas

This paper examines new combinations of Data Envelopment Analysis (DEA) and statistical approaches that can be used to evaluate efficiency within a multiple-input multiple-output framework. Using data on five outputs and eight inputs for 638 public secondary schools in Texas, unsatisfactory results are obtained initially from both Ordinary Least Squares (OLS) and Stochastic Frontier (SF) regressions run separately using one output variable at-a-time. Canonical correlation analysis is then used to aggregate the multiple outputs into a single “aggregate” output, after which separate regressions are estimated for the subsets of schools identified as efficient and inefficient by DEA. Satisfactory results are finally obtained by a joint use of DEA and statistical regressions in the following manner. DEA is first used to identify the subset of DEA-efficient schools. The entire collection of schools is then comprehended in a single regression with dummy variables used to distinguish between DEA-efficient and DEA-inefficient schools. The input coefficients are positive for the efficient schools and negative and statistically significant for the inefficient schools. These results are consistent with what might be expected from economic theory and are informative for educational policy uses. They also extend the treatments of production functions usually found in the econometrics literature to obtain one regression relation that can be used to evaluate both efficient and inefficient behavior.