Examining operational efficiency with prudent risks of Covid-19: a contextual DEA analysis with an undesirable intermediate measure.

Abstract

In the wake of the losses of human lives and disruption to the world economy caused by the spread of the COVID-19 pandemic, it has become imperative to assess the effectiveness of containment strategies adopted by countries. The success of any containment strategy of achieving low mortality and high recovery rate depends on the efficient utilization of available but limited resources, such as number of hospital beds and healthcare workers. While the spreading pattern of the pandemic has been researched heavily, there is limited research that comprehensively focuses on the efficient utilization of available resources to achieve the desired aims of low mortality and high recovery. In order to close this research gap, we employ a two-stage network data envelopment analysis (DEA) to identify the inefficiency in the process and resolve the resource constraints by considering medical and non-medical (administrative) interventions as two serial stages. The number of infected people is treated as the intermediate product, which is an undesirable output of the first stage and subsequently enters the second stage as an input. This network DEA model successfully addresses the conflict between the two stages over the handling of infected people and assesses the vulnerabilities of the countries against the transmission rates of the disease in the respective countries. Thus, the objective of this study is to develop a well-coordinated plan for different government agencies to jointly mitigate the risk under constrained resources. The findings reveal that almost of the Organization for Economic Cooperation and Development (OECD) countries have used their resources suboptimally and are producing, on average, almost half the amount of the maximum possible outputs. As a sizeable amount of inefficiency can be explained by varying economic and demographic factors, such as health expenditure and the proportion of the aged population, the efficiency evaluation has been revisited with adjustments for unfavorable externalities. The analysis and its implications can help policymakers formulate optimal resource plans and identify potential areas for improvement.