The Mathematical Programming Approach To Efficiency Analysis

Abstract

Abstract In his classic paper, M. J. Farrell (1957) argues that the measurement of productive efficiency is of theoretical and practical importance; a satisfactory efficiency measure allows both empirical testing of theoretical arguments and economic planning to im­ prove the productivity of particular industries. Farrell ‘s approach, largely inspired by Koopmans (1951), was based on a production possibility set consisting of the conical hull of input-output vectors. This framework was generalized to multiple outputs and reformulated as a mathematical programming problem by Charnes, Cooper, and Rhodes (1978, 1979, 1981) thus initiating the mathematical programming approach to efficiency measurement known as data envelopment analysis (DEA).