Title: The issue of input/output slacks in validating data envelopment analysis-based Malmquist productivity index: an example from banking

Authors: Parakramaweera Sunil Dharmapala

Addresses: Operations Management and Business Statistics Department, College of Commerce and Economics, Sultan Qaboos University, Sultanate of Oman P O Box 20, Al-Khod 123, Muscat, Oman

Abstract: Data envelopment analysis (DEA) models have been used in formulating the Malmquist index to measure productivity change over time periods. In this article, we question the validity of this index in the presence of input/output slacks that appear in DEA models used. We demonstrate with an application to banking that Malmquist index loses its meaning whenever slacks are present. As a corrective method, to neutralise the effect of slacks, we propose intrinsic assurance regions to be appended to the DEA models.

Keywords: productivity change; Malmquist index; DEA; data envelopment analysis; IAR; intrinsic assurance regions; banking; input-output slacks.

DOI: 10.1504/IJMOR.2010.032720

International Journal of Mathematics in Operational Research, 2010 Vol.2 No.3, pp.302 - 319

Published online: 17 Apr 2010 *

Full-text access for editors Access for subscribers Purchase this article Comment on this article