Ranking-Based Second Stage in Data Envelopment Analysis: An Application to Research Efficiency in Higher Education

Abstract: An alternative approach for the panel second stage of data envelopment analysis (DEA) is presented in this paper. Instead of efficiency scores, we propose to model rankings in the second stage using a dynamic ranking model in the score-driven framework. We argue that this approach is suitable to complement traditional panel regression as a robustness check. To demonstrate the proposed approach, we determine research efficiency of higher education systems at country level by examining scientific publications and analyze its relation to good governance. The proposed approach confirms positive relation to the Voice and Accountability indicator, as found by the standard panel linear regression, while suggesting caution regarding the Government Effectiveness indicator.