Efficiency of Economic Regions in Finland 1988-1999: Application of the DEA method

The economic efficiency of the private sector in the 83 Finnish labour market areas is investigated by using the Data Envelopment Analysis method. This method is often used for assessing efficiency in public service production, but it can also be applied to regional economies. Compared with ordinary production function analysis, one of its advantages is the possibility to handle several output variables at the same time. For the study, private sector capital stock was first estimated. Other inputs included the number of employed by education level, years of schooling of the population and the local volume of public sector activity. As outputs, regional value added and personal real income were used. The study period 1988-1999 is interesting, because it includes years of rapid growth (1988-1990), falling into a deep recession (1990-94) as well as a time of recovery (1994-1999).