Productive Efficiency Measurement and Regulatory Reform: The Case of Vehicle Inspection Concessions∗

Abstract: The measurement of productive efficiency provides guidance about the likely effects of regulatory reform. We present a Data Envelopment Analysis (DEA) of vehicle inspection concessions for a sample of 38 inspection units between the years 2000 and 2004. The differences in the score efficiency figures show the potential in terms of technical efficiency of introducing some form of incentive regulation or of progressing towards liberalization. We also compute the scale efficiency scores, showing that only units in territories with very low density of population operate at a sub-optimal scale. Among those that operate with an optimal scale, however, there are significant differences in terms of size, the largest ones operating in territories with the highest population density. This reveals that the introduction of new units in the highest population density territories (a likely effect of some form of liberalization) would not be detrimental in terms of scale efficiency. We also show that in the years 2003 and 2004, characterized by high regulatory uncertainty for the units in the sample, there was no technical progress but the units operated with better managerial efficiency. Stations belonging to a large and diversified firm show more efficiency, reflecting economies of scale or scope at the firm level