Non-discretionary inputs in data envelopment analysis

The technique for efficiency measurement known as Data Envelopment Analysis (DEA) has been extended to allow non-discretionary inputs that affect production. Several methods exist for measuring efficiency while controlling for these fixed factors of production. This paper reviews these approaches, providing a discussion of strengths and weaknesses and highlighting potential limitations. In addition, a new approach is developed that overcomes existing weaknesses. To facilitate comparison, an analysis using simulated data is performed. The results show that the new approach improves existing models and performs relatively well. (C) 1998 Elsevier Science B.V. All rights reserved.