Efficiency Estimation of Production Functions: Data Envelopment Analysis Approach

Data Envelopment Analysis (DEA) is a Mathematical Programming technique that finds a number of applications to measure the performance of similar units. The performance of these units say Decision Making Units (DMU) is assessed with DEA is obtained by using the concept of Efficiency which is the ratio of Weighted Sum of outputs to weighted sum of inputs. The efficiency obtained by using DEA are relative to best performance of Virtual DMU. In the present study, the efficiency of Production has been measured by specifying and estimating the parameters of Translog output distance function. Further, a non-parametric approach has been applied to measure the efficiency of production by constructing several Linear Programming Problem based on Translog output distance function to study efficiency variation in Indian Commercial Banks.