Assessing the relative efficiency and productivity growth of vehicle inspection services: An application of DEA and Malmquist indices

Abstract The purpose of this paper is to analyze efficiency and productivity growth of the Norwegian Motor Vehicle Inspection Agencies for the period 1989–91. Efficiency measures are calculated by a non-parametric approach known as data envelopment analysis (DEA) which has particular applicability in the service sector. Productivity is measured by the Malmquist index and defined as the ratio between efficiency, as calculated by the DEA, for the same production unit in two different time periods. Total productivity growth has been found, but there is a variation among individual units. The observed total productivity can be accredited to decreasing input volumes and increased capacity. The main contributor to the observed total productivity growth is the frontier technical change effect which is found to be remarkably positive. The calculated efficiency measures show that there is, on the average, an input saving potential of 21–29% for the sector as a whole. The individual units are found to be rather unstable with respect to efficiency scores across the years of observation. The efficiency scores are not affected by the size of the units.