Data Envelopment Analysis a Technique for Measuring Efficiency

Abstract

Universities play an important role in the social and economical development of a country. Therefore, governments usually provide the financial resources universities need. On the other hand, universities should be efficient in satisfying the government's conditions of functional resources. Finding a transparent and systematic way to distributing the funds to each university is a major challenge for government. With participation in higher education amongst young people rising, governments around the world have been faced with increasing pressure on their finances, giving rise to the need to operate universities with a higher degree of efficiency. Data Envelopment Analysis (DEA) is a powerful method widely used in the evaluation of performance of Decision Making Units (DMUs). These can be business units, government agencies, police departments, hospitals, educational institutions, and even people DEA have been used in the assessment of athletic, sales and student performance). This paper provides an introduction to DEA and some important methodological extensions that have improved its effectiveness as a productivity analysis tool. Data Envelopment Analysis (DEA) techniques are used to estimate technical and scale efficiency of individual Saudi Arabia universities 2010. The purpose of this paper is to present basic principles of DEA and evaluate its application possibilities to assess the performance of nineteen Saudi Arabia universities. DEA is a choice between constant returns to scale CRS and variable returns to scale VRS. The CRS efficiency score represents technical efficiency, which measures inefficiencies due to input/output configuration and as well as size of operations. On the other hand, the VRS efficiency score represent pure technical efficiency, that is, a measure of efficiency without scale efficiency. The results found that the number of universities with maximum relative efficiency was ten out of nineteen universities when CRS was used. The number of universities with maximum relative efficiency was fifteen out of nineteen universities when VRS was used. The percentage of inefficiency was determined for each inefficient university, together with the extent of inputs that could be reduced and the extent of outputs that could be increased in these universities in order for them to be fully efficient.