A homothetic reference technology in data envelopment analysis

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The assumption of a homothetic production function is often maintained in production economics. In this paper we explore the possibility of maintaining homotheticity within a nonparametric DEA framework. The main contribution of this paper is to use the approach suggested by Hanoch and Rothschild (1972) to define a homothetic reference technology. We focus on the largest subset of data points that is consistent with such a homothetic production function. We use the HR-approach to define a piecewise linear homothetic convex reference technology. We propose this reference technology with the purpose of adding structure to the flexible non-parametric BCC DEA estimator. Motivation for why such additional structure sometimes is warranted is provided. An estimation procedure derived from the BCC-model and from a maintained assumption of homotheticity is proposed. The performance of the estimator is analyzed using simulation.

Original languageEnglish
JournalEuropean Journal of Operational Research
Issue number3
Pages (from-to)759–771
Publication statusPublished - 16. Mar 2014


  • Convex hull
  • DEA based estimation of a homothetic production function
  • Data enveopment analysis
  • Homothetic hull
  • Intersection and sum form
  • Isoquant estimation


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