Application of the Nonparametric DEA Meta-frontier Approach with Undesirable Outputs in the Case of EU Regions

Abstract

Background: The paper focusses on the efficiency evaluation of the EU-28 NUTS 2 regions production process according to the concept of the Regional Competitiveness Index 2013. Objectives: Production units are divided into four groups using the factors of regional competitiveness. Production technology also enables reduction of the undesirable outputs (a negative impact on health and long-term unemployment). Based on the analysis of distance of the production units from the efficiency frontiers, a directional output distance function assuming a constant return to scale is used. This approach thus respects the heterogeneity among the groups of regions. Methods/Approach: The nonparametric meta-frontier Data Envelopment Analysis approach was used in two steps. Firstly, the efficiency evaluation within each group of regions is provided and in the second step the meta-frontier is set down. For the measurement of the gap between the group-frontier and the meta-frontier, the technology gap ratios are provided. The paper also analyses environmental inefficiencies. Results: The obtained results indicate that a significant improvement of meta-technology ratio holds within the European context. Conclusions: The combination of empirical findings, with respect to technology gaps and environmental technology gaps, supports the evidence that traditional differences of technological frontiers formation are more significant in comparison to group frontiers constitution.