Examples of the Application of the Free Disposal Hull (FDH) Method as a Tool for Measuring the Efficiency of Public Institutions from the Perspective of Public Finance in Various Countries
Year: 2025
Type: conference-paper
Abstract: Public institutions play a fundamental role in implementing tasks of strategic importance from the perspective of both central and local governments. Due to their impact on public finance outcomes - at both individual and national levels - assessing their operational efficiency has become a crucial area of contemporary research. Among the various tools used for this purpose, non-parametric methods such as Data Envelopment Analysis (DEA) and its extension, the Free Disposal Hull (FDH) method, have gained significant relevance. This study presents the methodological foundations and practical applicability of the FDH method in evaluating the efficiency of public finance institutions. Based on a critical review of international literature, the paper highlights case studies from countries such as Brazil, Italy, Indonesia, Egypt, and Greece. The analysis emphasizes the importance of software tools used in efficiency modeling - SPSS 29.0, R, EMS 1.3, MAXDEA, and Banxia Frontier Analyst 4.0 – demonstrating their essential role in producing reliable results and supporting data interpretation. Findings show that FDH results are generally easy to interpret, offering valuable information for decision-makers. However, the method often identifies a higher proportion of units as efficient compared to DEA, and is rarely used in isolation - typically paired with DEA to validate model robustness and data selection. Notably, financial variables were used as input data in only a few studies, underscoring the need for more financially grounded analyses in public policy assessment. A key limitation identified is the inconsistency in the time ranges of data used across studies. Standardizing this aspect could enhance the reliability of comparative evaluations. The study concludes by calling for further research to develop consistent time-frame selection patterns and apply them to key sectors of public finance in countries such as Poland.
Source: Procedia Computer Science
Author: Karolina Willa
Institution: Koszalin University of Technology
Language: English
Field: Decision Sciences
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W4415974912