Measuring the economic efficiency of producing rural road services

The research reported here examines the ability of a sample of Midwest township officials to produce low-volume rural road services in an economically efficient manner. Farrell-type measures of input use and scale efficiency are reported. Results suggest that over 50% of costs may be unnecessarily incurred because of input use inefficiency. Correlation between output measures and the efficiency measures suggests that larger jurisdictions are more efficient than smaller jurisdictions. In addition, 84.5% of the townships exhibit technology characterized by increasing returns to scale. These results suggest that jurisdictional consolidation of production-related responsibilities may yield substantial cost savings.