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Productive efficiency and regulatory reform: The case of vehicle inspection services

  • Francesc Trillas


    (Grup de Recerca en Federalisme Fiscal i Economia Regional (Institut d'Economia de Barcelona-IEB), Departament d'Economia i Història Econòmica, Universitat Autònoma de Barcelona)

  • Daniel Montolio


    (Grup de Recerca en Federalisme Fiscal i Economia Regional (Institut d'Economia de Barcelona-IEB), Departament d'Hisenda Pública, Universitat de Barcelona)

  • Néstor Duch


    (Grup de Recerca en Federalisme Fiscal i Economia Regional (Institut d'Economia de Barcelona-IEB), Departament d'Econometria, Estadística i Economia Espanyola, Universitat de Barcelona)

Measuring productive efficiency provides information on the likely effects of regulatory reform. We present a Data Envelopment Analysis (DEA) of a sample of 38 vehicle inspection units under a concession regime, between the years 2000 and 2004. The differences in efficiency scores show the potential technical efficiency benefit of introducing some form of incentive regulation or of progressing towards liberalization. We also compute scale efficiency scores, showing that only units in territories with very low population density operate at a sub-optimal scale. Among those that operate at an optimal scale, there are significant differences in size; the largest ones operate in territories with the highest population density. This suggests that the introduction of new units in the most densely populated territories (a likely effect of some form of liberalization) would not be detrimental in terms of scale efficiency. We also find that inspection units belonging to a large, diversified firm show higher technical efficiency, reflecting economies of scale or scope at the firm level. Finally, we show that between 2002 and 2004, a period of high regulatory uncertainty in the sample’s region, technical change was almost zero. Regulatory reform should take due account of scale and diversification effects, while at the same time avoiding regulatory uncertainty.

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Paper provided by Xarxa de Referència en Economia Aplicada (XREAP) in its series Working Papers with number CREAP2006-02.

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Length: 29 pages
Date of creation: Sep 2006
Date of revision: Sep 2006
Handle: RePEc:xrp:wpaper:creap2006-02
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