An NDEA Model as Policy Tool to Support Managerial Decisions

Abstract

Data Envelopment Analysis (DEA) is a non-parametric frontier approach used both to model production processes and/or production organisations of goods and services (public and private) as inputs/output systems and to measure their relative efficiency. However, in addition to being an instrument for measuring economic performances, the DEA is also used in its multiplicative version as a policy tool to support managerial decisions for the pursuit of competing objectives. Based on the data, the DEA offers an answer to the pursuit of competing objectives by placing it as a trade-off and calculating the optimal weights associated with each of them. Here, we will address two questions: 1) how to overcome the DEA modelling of decision-making units as "black boxes" that use inputs to be translated into outputs to taking into account the operations/stages involved in this transformation process, and 2) how to use the Network Data Envelopment Analysis (NDEA) approach as a policy tool. In particular, we will propose a way to use a relational NDEA model as a policy tool by exploiting the possibility of making assumptions about the model variables. In our opinion, compared to the standard DEA, the advantage of using the NDEA as a policy tool is that the policy objectives (in this case organisational) can also be disaggregated at the sub-process level. In particular, we will propose to translate the system of organisational objectives into an NDEA model as a mix of "discretionary/non-discretionary" assumptions about the variables of the model itself. To clarify our proposal, we will then develop an application in the public health services sector.