Efficiency in the Production of Rural Road Services: The Case of New England Towns

An analysis of size and managerial efficiency of northern New England towns in the production of rural road services is reported. A stochastic cost frontier was used as the normative efficiency reference set. Empirical results provide evidence of economies of size in the production of road service in New England and that size inefficiencies are present. Results also suggest that managerial inefficiencies, or input use inefficiencies, are present and costs may be 40% higher than necessary. At issue is the effectiveness of current institutional arrangements: small town governments may best match local demand with services, but at high cost. -Authors