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.