A Radial Framework for Estimating the Efficiency and Returns to Scale of a Multi-Component Production System in DEA

This paper provides radial measurements of efficiency for the production process possessing multi-components under different production technologies. Our approach is based on the construction of various empirical production possibility sets. Then we propose a procedure that is unaffected affected by multiple optima for estimating returns to scale. The theoretical connections between the traditional black box and the proposed multi-component approach are established, which ascertains consistency in estimating the efficiency and returns to scale. Moreover, we introduce two homogeneity conditions, which clarify the difference between our approach and the existing one, and are important for evaluating performance in multi-component setting. Finally, an empirical study of the pollution treatment processes in China is presented, and compared to the results from black-box approach. Many insightful findings related to the operations of the pollution treatment processes in China are secured