Publication: A reasonable benchmarking frontier using DEA : an incentive scheme to improve efficiency in public hospitals
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2007-03
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Abstract
There exists research relating management concepts with productivity measurement methods that
offers useful solutions for improving management control in the public sector. Within this sphere,
we connect agency theory with efficiency analysis and describe how to define an incentives
scheme that can be applied in the public sector to monitor the efficiency and productivity of
managers. To fulfill the main objective of this research, we propose an iterative process for
determining what we define as a ‘reasonable frontier’, a concept that provides the foundation
required to establish the incentive scheme for the managers. Our ‘reasonable frontier’ has the
following properties: i) it detects the presence of outliers, ii) it proposes a procedure to establish
the influence introduced by extreme observations, and iii) it sorts out the problem of data masking.
The proposed method is applied to a sample of hospitals taken from the public network of the
Spanish health service. The results obtained confirm the applicability of the proposal made.
Summing up, we define and apply a useful method, combining aspects of agency theory and
efficiency analysis, which is of interest to those public authorities trying to design effective
incentive schemes which influence the decision making of the public managers.
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Incentives, Agency theory, DEA, Outliers detection, Data masking