An Efficiency Analysis of Minnesota Counties: A Data Envelopment Analysis Using 1993 IMPLAN Input-output Analysis

Abstract

Data Envelopment Analysis (DEA) is a multi-input, multi-output optimization model used to measure relative efficiency or the best practice counties. The IMPLAN input-output 1993 database and software estimates gross output, final demand, and final payments categories at the county level. The IMPLAN data contains estimates of four forms of final payments. Transfer payments are added as inputs but are taken from a separate source. IMPLAN also includes four forms of final demand as outputs. These inputs and outputs form a production frontier of "best practice" counties. Deviations below the frontier will be used to measure the degree of county inefficiencies based upon minimizing the use of inputs and maximizing the sale of outputs. Measurement of relative county efficiencies allow comparison between urban core counties, suburban transitional counties and rural periphery counties. County comparisons of returns to scale verify the existing body of land rent theories. Agglomeration economies measured by DEA efficiency scores and returns to scale measured by DEA frontier intercepts imply that location and urbanization economies are largest in urban core counties and that their effects diminish as distance from the core increases.