The Importance of Discriminant Metrics in Efficiency Analysis

Abstract

In this article, a non-parametric deterministic method that combines efficiency models with mathematical techniques to examine decision units is applied. In order to better understand the calculated efficiencies, characterize and identify possible improvements in less efficient units, four discrimination metrics are proposed. The metrics are determined by how the efficiency index is calculated. The metric that best represents data and allows for more detailed analysis of results is taken as a reference to build a new metric with a more complete structure. The latter allows a general characterization of the decision unit in the context studied. The methodology presented in this study is discussed through an empirical application, which allows examining the efficiency of European countries in production sectors.