Identifying Sub-Areas that Comprise a Greater Metropolitan Area: The Criterion of County Relative Efficiency

Abstract

Data Envelopment Analysis (DEA) is used to measure and rank the relative efficiency of thirty-two counties comprising the Greater Minneapolis-St. Paul Metropolitan Region. This approach supports the notion that the greatest external economies originate in the urban core and decline as one moves toward the transitional areas and the periphery. DEA is a multi-input, multi-output optimization model used to form a frontier of “best practice” counties. By employing the 1993 IMPLAN input-output database and county estimates of three forms of final payments to represent inputs and four categories of final demands to represent outputs, DEA can rank counties which produce a maximum amount of output, while utilizing a minimum amount of inputs. In addition we use a sensitivity analysis introduced by Charnes et al. (1992) and (1996) to determine the robustness of the efficiency classifications. This approach confirms the relative efficiency differences expected between the three groups identified as the metropolitan core, the transitional area and periphery.