Measuring the efficiency of economic growth in East Java using data envelopment analysis

Abstract

Measuring the efficiency of economic growth has been regarded as a crucial task because it depicts the quality of people's lives. Efficiency refers to the ratio of output to specified inputs. There are some methods to investigate efficiency, such as Data Envelopment Analysis (DEA). This method evaluates the efficiency of a set of decision-making units (DMUs) that employ numerous inputs to generate output by solving linear programming problems. This method is widely known as a managerial tool for measuring efficiency because it does not require prior assumptions. Therefore, this paper aims to measure the efficiency of economic growth in 38 regions in East Java over the period 2015-2019 using Data Envelopment Analysis. We consider two input variables, namely labor and regional expenditure, and one output variable, regional Gross Domestic Product (GDP), meanwhile 38 regions are considered DMUs. The term input-oriented model refers to a reduction in the amount of input used to produce a given output, indicating input use efficiency. Furthermore, two DEA models termed CCR and BCC models are employed. The result reveals that by using the CCR model, Kota Kediri is the only efficient region during the period 2015-2019. Meanwhile, according to the BCC model, Kota Kediri, Kota Surabaya, Kota Mojokerto, Kota Pasuruan and Kota Probolinggo are all efficient. On the other hand, other regions are inefficient.