Allocating natural resource reduction amounts: A data envelopment analysis based-approach considering production technology heterogeneity

Previous studies resource allocation methods based on data envelopment analysis assume that all the assessed decision-making units share a common production technology, and all decision-making units become efficient after the resources are allocated. However, in the real world, production technology tends to be heterogeneous among the decision-making units because of the differences in economic development, geographic location, and market conditions. Correspondingly, when some decision-making units are far away from the efficient frontier, they may not become efficient easily using the resources allocated to them. In this paper, we propose a data envelopment analysis-based approach which considers production technology heterogeneity among decision-making units when allocating resource reduction amounts to each. In our model, the decision-making units are divided into subgroups based on their economic development level, an important indicator directly reflecting each decision-making unit's production technology level. Each subgroup has its specific production technology, and the decision-making units in the same subgroup have a similar technology level, which allows better identification of how the production of those decision-making units can change when their resource inputs change. We present an empirical example using China's mainland provinces as decision-making units to demonstrate the practicability and applicability of our proposed model.