A data envelopment analysis approach to clustering operating units for resource allocation purposes

A data envelopment analysis approach to clustering operating units for resource allocation purposes

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Article ID: iaor19971683
Country: United Kingdom
Volume: 24
Issue: 4
Start Page Number: 463
End Page Number: 476
Publication Date: Aug 1996
Journal: OMEGA
Authors:
Keywords: performance, public service
Abstract:

Bodies such as those funding education or health services normally make use of marginal resource levels (e.g. the level of funding per pupil) to allocate resources to operating units. It is typically desired that marginal resource levels should encourage the operating units to use resources as efficiently as possible. This paper develops a method for simultaneously clustering operating units and determining a different set of marginal resource levels for resourcing the units of each cluster, consistent with the foregoing aim. The user controls the number of clusters created, striking a balance between the multiplicity of sets of marginal resource levels estimated and the strength of the incentive offered to operating units to use a resource efficiently. The clusters identified can prove useful in themselves in that operating units sharing similar environmental conditions and/or value systems are identified.

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