Using VEA to assess effectiveness in the development of human capabilities

Abstract

In this paper, we use value efficiency analysis (VEA) to assess effectiveness by means of a model decision making unit which is used as an overall benchmark. The latter is unanimously agreed that is “doing the right things” and defines a range of operating input/output mixes that is preferred by experts. We then decompose the effectiveness estimates into an efficiency component capturing the extent of “doing things right” and a mix component capturing the relative distance of the assessed units’ operating mix from the preferred range of operating mixes. The latter is residually estimated as the ratio of data envelopment analysis and VEA efficiency scores. We use the proposed approach to examine the effectiveness of countries in utilizing their economic prosperity to further develop their citizens’ social prosperity or human capabilities using UN data for the year 2015. The empirical results provide useful insights that help detecting countries which may need a shift of focus to relatively neglected aspects, in order to further enhance the capabilities of their citizens.