Socio-Economic Planning Sciences 62 (2018) 31e43

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Socio-Economic Planning Sciences

journal homepage: www.elsevier.com/locate/seps

DEA-based Malmquist productivity indexes for understanding courts

reform
Greta Falavigna a, Roberto Ippoliti b, *, Giovanni B. Ramello c
a
CNR e IRCrES (National Research Council of Italy e Research Institute on Sustainable Economic Growth), Via Real Collegio 30, Moncalieri, Torino, Italy
b
National School of Administration, Presidency of the Council of Ministers (Prime Minister's Office), Via dei Robilant 11, Roma, ROMA, Italy
c
University of Eastern Piedmont, Institute of Public Policy and Collective Choices (POLIS), Via Cavour, Alessandria, AL, Italy

a r t i c l e i n f o a b s t r a c t

Article history: Currently there is no clear empirical evidence as to which the most appropriate reform to improve
Received 21 December 2016 national judicial systems might be, i.e., whether it is better to implement a policy which focuses on
Received in revised form judges and their incentives or, alternatively, a policy aimed at reorganizing the courts' structure.
15 June 2017
The judicial system, like many other sectors of the public administration, is an industry producing a
Accepted 1 July 2017
Available online 3 July 2017
specific good e justice e and, accordingly, it can be studied by using the customary tools of production
theory. The paper applies the two-stage analysis by Simar and Wilson (2007) and the Malmquist index to
the judiciary, in order to better understand the impact of a specific policy on the productivity of the
Keywords:
Judicial efficiency
Italian tax judiciary.
Courts reform The results highlight strong heterogeneity among courts, depending on their geographical location,
Malmquist productivity indexes with North-West and North-East of Italy as the most efficient macro areas. Moreover, by decomposing
the index into change in efficiency and change in technology, this work provides a further glimpse into
the judiciary's production organization. Interestingly, the evidence shows that a reduction in the number
of active sections has had a negative impact on the overall performance of the courts (i.e., a negative
change in efficiency of 0.0103, with a p-value < 0.01), although the reorganization of the residual sections
has possibly determined a more effective use of the remaining resources (i.e., a positive change in
technology of 0.00285, with a p-value < 0.01). Hence, technology does not fully replace the productive
role of the judges.
The overall results suggest that adjudication is a labor-intensive activity and, although fine-tuning
their organization can indeed enhance the productivity of the courts, the role of the judges still re-
mains pivotal. There might indeed be ways to increase the efforts made by judges and a suitable policy
should create incentives aimed at boosting their productivity.
© 2017 Elsevier Ltd. All rights reserved.

1. Introduction
Courts are dispute resolution technologies producing outputs
which are relevant to society and the economy in many respects.
Despite this relevance, which in turn affects economic growth and
well-being [28,29,40,44], judicial ‘production technology’ has been
largely neglected and scholars have only recently tried to gain a
deeper understanding of it by conducting applied research
[20,48,69,77]. Moreover, policy elaboration hardly ever relies on
robust empirical evidence, so that decisions are very often made on
* Corresponding author.
E-mail address: roberto.ippoliti@unipmn.it (R. Ippoliti).
the basis of beliefs rather than observation on how this system
actually works. This is even more relevant if we consider the Italian
judicial system, which is one of the most inefficient in Europe ac-
cording to the Organization for Economic Co-operation and
Development [60] and the European Union [8], as well as the In-
ternational Monetary Fund [25]. However, there is no clear
empirical evidence as to which the best option among alternative
reforms might be. How might policy-makers shape an effective
policy aimed at reforming the judicial system? Is a policy aimed at
reorganizing the courts appropriate? Alternatively, is it better to
consider a policy which focuses on judges and their incentives?
These are the main research questions, which are addressed by the
article to fill the current knowledge gap.
This study follows the above line of inquiry, focusing on a quasi-

http://dx.doi.org/10.1016/j.seps.2017.07.001
0038-0121/© 2017 Elsevier Ltd. All rights reserved.
32 G. Falavigna et al. / Socio-Economic Planning Sciences 62 (2018) 31e43
natural experiment occurred in the Italian tax judiciary, in order to
‘access the black box’ of judicial production and try to shed light on
its mechanisms. More precisely, it concentrates on a new policy
devoted to fostering the productivity of courts e and to saving
public money e by reducing the number of sections (the courts'
production lines). The main idea behind the aforementioned policy
is that, by reducing the sections and encouraging the reorganiza-
tion of the remaining sections and relative resources, it is possible
to foster economies of scale, thus preserving and even enhancing
productivity, while also reducing public expenditure. However,
adjudication is a labor-intensive activity and the role of the judges
still remains pivotal, that is to say, the policy maker might increase
judicial productivity by reorganizing the courts (change in tech-
nology), as well as by using the main input (the judges' work) more
effectively. This is exactly our main hypothesis: technology cannot
replace the pivotal role of judges in producing decisions, as adju-
dication mainly remains a labor-intensive activity. According to this
hypothesis, these two components might be complementary rather
than substitutable and the policy-makers should necessarily look
for new approaches to introduce productivity shocks.
In this respect, the instruments provided by production theory
are a helpful and, we believe, unavoidable reference point to be
considered in policy decision-making in order to match expected
outcomes and policy aims. In details, the authors adopt the Data
Envelopment Analysis (DEA) methodology and Malmquist indexes
to evaluate efficiency and productivity of the Italian judicial sys-
tems, since they are recognized by the current literature as suc-
cessful techniques to evaluate the performance of decision making
units (e.g., [82e84]). The main positive feature of this methodology
concerns the relaxed assumptions on input-output data distribu-
tion (i.e., non-parametric technique), as well as the non-
specification of the technological frontier [85]. Indeed, the effi-
ciency score and the relative related frontier is are derived by
computing the radial distance from the origin for each decision
making units. Finally, differently from other econometric models,
the DEA technique can be computed with a small sample of ob-
servations and the interpretation of the collected (calculated?)
technical efficiency scores is extremely intuitive.
Using key production theory tools, this paper adopts Data
Envelopment Analysis (DEA) to provide a measure of court per-
formance before and after the implementation of the policy in
question. Yet, thanks to the application of the Malmquist index, our
investigation goes one step further in assessing the effectiveness of
public policies by identifying the main components of changes in
efficiency. Following a consolidated stream of scientific literature
that has successfully used the Malmquist index to analyze several
production activities, the paper shows the policy relevance for the
judiciary e and other production bodies of the public administra-
tion e of breaking down changes promoted by exogenous in-
terventions into their primary elements.1 This is exactly what the
current study aims to do and, in this respect, it represents a step
forward in the current literature. Indeed, this is the first study
which applies the Malmquist index to the judiciary e and this is the
main contribution of this work to the current literature on judicial
efficiency, supporting the evaluation of a structural reform aimed at
boosting the performance of the public administration.
The paper is organized as follows. Section 2 surveys the available
literature on judicial productivity and courts efficiency, while
1 Efficiency of Justice.
See, for instance, Berg et al. [4] and Tortosa-Ausina et al. [76] focusing on the
banking sector, Maniadakis and Thanassoulis [55] and Ippoliti and Falavigna [43] on
the healthcare sector, Odeck [59] on vehicle inspection services, Kao and Hwang
[47] on the non-life insurance industry, and Chavas [11] and Nin et al. [58] on
agriculture.
Section 3 summarizes the production structure of tax courts in Italy
and briefly describes the policy in question. Section 4 explains the
methodology. Section 5 presents data and descriptive statistics,
while Section 6 illustrates the results of the second stage analysis.
Finally, Section 7 proposes some conclusions.
2. Courts organization and judicial productivity: an overview
A growing body of literature has recently tried to gain a deeper
insight into the workings of courts, stimulated by the efforts of
governments and international organizations to better understand
and improve the performance of judicial systems.2 Building on the
seminal contributions by Cooter [18] and Posner [62] on how in-
centives affect the behavior of judges in terms of effort and choices,
other scholars have tried to identify the determinants of produc-
tivity in relation to courts and judges. The individual characteristics
of judges and the structural characteristics of courts have thus been
empirically investigated. Taha [75] applied the utility-maximizing
model to judicial decisions, focusing on federal district court
judges in the US and their habits regarding publishing decisions,
with results highlighting the economic orientation of judicial
choices. Landes et al. [50] and Choi et al. [13] analyzed the US courts
and Ramseyer [65] concentrated on the Japanese system,
concluding that the educational background of judges (as a proxy
for their intellectual ability) greatly influences their performance.
Other studies show that courts and judges generally respond to a
heavier caseload by increasing their productivity (e.g. [3], on Israeli
courts and [21] on Slovenia).3 At the same time, the behavior of
judges may also be characterized by inertia in their work habits,
which cancels out the positive effects of policies designed to pro-
mote efficiency. A number of studies have targeted the most
prominent ‘disease’ of the judicial system (at least from the citizens'
point of view), i.e. ‘delay’, or the time required to reach a decision.
The expertise of judges can speed up decision times, but there are
also organizational features which affect the overall result [6,52].
Hence, a joint analysis of the behavior of judges on the one hand
and of the organization of courts on the other hand is crucial in
order to grasp the whole picture.
It is worth noting that all the above studies have investigated
specific court systems within national boundaries. Narrowing
down the research scope to a particular country or judiciary means
that the results cannot be immediately generalized. However, the
advantage of this approach is that it eliminates any issues of
comparability among observations from different judicial systems.
Furthermore, studying specific, homogeneous judicial systems in
this way has enabled a number of scholars to test efficiency using a
standard industrial measure for homogenous production units,
known as Data Envelopment Analysis (DEA). DEA is a non-
parametric technique that makes it possible to comparatively
assess the efficiency scores of several basic production components.
It has been extensively applied to many other production sectors
and can be used to investigate the workings of a particular courts
system.4
A number of studies on the judiciary have successfully imple-
mented the DEA methodology [9,48,51] and a few of these have
2
Fostering judicial efficiency has entered the agenda of many national and in-
ternational organizations. The first noteworthy attempt was led by the World Bank
and has been followed in recent years by national (i.e., governments) or suprana-
tional authorities. An example of the latter is the European Commission for the
3
This is the motivation behind the recent bill submitted to the US congress (S.
699: Court Efficiency Act of 2013).
4
See, e.g., applications to bank and credit risk [35,67,74], to energy and the
environment [81], and to the healthcare sector [12,64].
 G. Falavigna et al. / Socio-Economic Planning Sciences 62 (2018) 31e43
used the two-stage DEA approach [20,42,44,69] to analyze the
determinants of inefficiency. More specifically, Lewin et al. [51]
investigated the efficiency of criminal courts and judicial districts
in North Carolina, adopting the number of judgments and number
of cases pending for less than 90 days as outputs, whereas the in-
puts considered were: caseload, number of district attorneys and
staff, days of court held, number of misdemeanors within the
caseload, and size of white population. Kittelsen and Førsund [48]
conducted a study on Norwegian district courts, taking the num-
ber of judges and staff as inputs and cases settled as output, clas-
sified according to judicial category (e.g., civil cases, criminal cases,
etc.). Chaparro and Jimenez [9] assessed the technical efficiency of
the Administrative Litigation Division of the Spanish High Courts,
identifying the staff as input and the cases settled as output,
considering cases resolved by means of a full legal process (i.e., with
a sentence) as well as cases resolved by other means (e.g., concili-
ation, withdrawal, dismissal, etc.). Yeung and Azevedo [80] used
DEA to measure the efficiency of Brazilian state courts, taking the
number of judges and staff as input and first/second instance court
decisions as output.
A common feature of all the above works using DEA is the
assumption of constant returns to scale, since the observations are
supposed to be homogeneous. Hence, these studies assume that
there is no (positive or negative) relation between the size of a
court and its productivity e in other words, that there are no
economies of scale [9]. Of course, this assumption severely limits
the analysis because it does not take into account the heterogeneity
of court organization. More recently, Santos and Amado [68]
refined previous analyses with a study on first instance courts in
Portugal which adopts variable returns to scale. Inputs are once
again staff and judges, while an interesting step forward concerns
disaggregation per case type, as the authors innovatively consider
43 outputs, representing the decisions reached in different judicial
domains.
For what concerns the two-stage DEA, Schneider [69] conducted
an analysis focusing on the German Labor Courts of Appeal, taking
the number of cases resolved as output and the number of judges
and their caseloads as inputs. In the second stage, the author found
evidence of a relation between judicial career incentives and court
performance. Deyneli [20] studied the relationship between the
efficiency of justice services and the salaries of judges in European
countries. The author considered the number of judges and of office
staff as inputs, while cases settled were the output in the first stage.
In the second stage, technical efficiency scores were then regressed
for judges' salaries, judges' basic education, and number of courts
(i.e. explanatory variables). However, none of the aforementioned
contributions has adopted the bootstrap approach, which provides
a more robust estimation of technical efficiency scores [73]. Fala-
vigna et al. [30] propose a comparative study between DEA and the
Directional Distance Function (DDF) applying the bootstrap pro-
cedure. More precisely, they compare the results obtained with the
two non-parametric techniques in order to assess the usefulness of
DEA formulations including negative outputs when externalities,
such as judicial delay, arise.
All the above literature focuses on a static picture, without
considering policy effects on court performance. Thus far, no study
has applied the Malmquist index or similar approaches extensively
used in production theory in order to gain further insights into the
courts' production structure and the internal impact of structural
changes. This is exactly what the current study aims to do and, in
this respect, it represents a step forward in the current literature. In
other words, the adoption of the Malmquist indexes provides the
main contribution of this work to the current literature on judicial
efficiency, supporting the evaluation of a structural reform aimed at
improving the performance of this key sector of the public
33
administration. In effect, as will be shown below, this approach
provides a deeper understanding of how the judiciary works, since
it makes it possible to investigate its production structure and to
observe the determinants of changes in productivity, thus also
contributing to the development of policy guidelines.
3. The Italian tax judiciary and the new policy
Before proceeding with the analysis, an overview of the features
of the Italian tax courts system is presented, in order to better
understand their production organization and how to measure
productivity changes and their components.5
Tax courts exercise special jurisdiction, since their subject
matter is limited to tax controversies, that is to say fiscal allegations
made by the Italian Revenue Service (Agenzia delle Entrate) against
individuals or corporations. They are organized according to three
vertically related levels: the first instance court is called Commis-
sione Tributaria Provinciale (hereinafter CTP), the court of appeal is
called Commissione Tributaria Regionale, and the court of last resort,
Corte Suprema di Cassazione, ensures the legitimacy of the decisions
reached by the lower courts. Since the possibility of obtaining
statistically significant results crucially depends on appropriate
sample size, the data used here concern the first instance courts
system (i.e., the CTPs), which comprises 103 units.
The procedure to review tax cases in the CTPs is strictly regu-
lated by law (Legislative Decree 546/92). According to this decree,
the judges collectively decide on the cases as a bench, while the
administrative staff assists them in the decision-making process
and deals with all the related bureaucracy. Moreover, every CTP can
be divided into one or more sections, and each section (made up of
a president, a vice-president, and at least four other judges) com-
prises smaller production subunits e i.e., a bench including at least
3 judges e ruling on cases autonomously.
With a Ministerial Decree issued on 11th April 2008, the Italian
government amended a policy aimed at fostering the productivity
of CTPs and at cutting public expenditure by reducing the number
of sections, which, as explained above, has affected the number of
production lines (i.e., the benches) and, in turn, the number of
judges. However, it has also freed staff and other resources, thus
leading to a partial reorganization of the remaining sections and of
the courts as a whole.
Hence, a reasonable question which the paper tries to answer is
whether the policy has had the overall consequence of increasing
(or decreasing) productivity. Yet, as mentioned above, this may lead
to preliminary and somewhat rough results. In order to thoroughly
assess the effectiveness of the policy, it is useful to decompose the
changes occurred in terms of use of inputs (change in efficiency) or
overhaul of the internal organization (change in technology). A
further breakdown of the effects of the policy can shed light on
which components are relevant for its success or failure, since the
aggregate outcome e being the net results of many effects e might
prove to be misleading. This is very important for subsequent
policy-making and equally fundamental for public finance. Indeed,
the performance of the tax judiciary is key in combating tax fraud
and evasion, which is a crucial element for both the protection of
national budget revenues and the confidence of citizens in the
fairness and effectiveness of tax systems [26]. Considering the
current age of austerity and the Stability and Growth Pact (SGP),
with its limits for government deficit and debt, analyzing the
impact of a policy aimed at boosting the efficiency of the national
tax judiciary can represent a priority for the Italian government.
This is even more significant if we consider Italy's compliance with
5
For an extensive description, see Falavigna et al. [30].
34 G. Falavigna et al. / Socio-Economic Planning Sciences 62 (2018) 31e43
the maximum limit for government deficit and debt outlined in the
SGP [27].
As is well known, this kind of measurement is performed on a
regular basis in production studies by means of the Malmquist
index, a suitable tool for assessing changes in productivity and
decomposing them into their main elements. It is worth noting that
controlling for geographical location is crucial, since the first
instance courts system (like many other bodies of the public
administration) is a production organization spread over the na-
tional territory, with considerable heterogeneity among macro-
areas due to idiosyncratic socio-economics factors. Similarly,
since adjudication heavily relies upon the work of judges and each
individual judge is different from the next, we will also try to
determine whether judges are the cause of further heterogeneity.
4. Efficiency and productivity change estimates: methodology
From a methodological viewpoint, this work estimates the
courts' technical efficiency scores by using DEA and changes in
productivity by using the Malmquist index, as done in Ippoliti and
Falavigna [43]. The next step is to apply a two-stage approach in
order to gain a deeper understanding of the matter.
4.1. Data Envelopment Analysis (DEA)
DEA is a non-parametric technique which allows efficiency
performance to be measured as a score [16]. The DEA approach lets
researchers build a deterministic, non-parametric production
frontier comparing the performance of several Decision Making
Units (DMUs), which in our case are the tax courts of first instance
(i.e., the CTPs). Technical efficiency scores are computed based on
the radial distance of every DMU from the frontier.6 Here we have
used the output-oriented model, as proposed by Farrell [34]; and
we have also assumed Variable Returns to Scale (VRS) [86].
The technical efficiency scores (TEi) connected to each tax court
(Data Making Unit, DMU) are computed in this way:
TEi ¼ zi i ¼ 1; …; n
where n is the number of DMUs and 1  TEi  þ∞.
TEi scores are computed by solving the following linear pro-
gramming duality problem, on the basis of output-oriented DEA
approach [34]:
Maxz;l zi
subject to:
N10 l ¼ 1
zyi  Yl  0
xi þ X l  0
l0
where z is a scalar > 1, l is a vector of nx1 weights allowing for
convex combination of inputs and outputs, Y is an sxn output
matrix, X is an input matrix and N1 is an Nx1 unitary vector.
Furthermore, z-1 indicates the output proportional increment,
maintaining the input level constant.
The output-oriented framework aims to maximize output levels
while holding the inputs constant, on the assumption that the in-
puts cannot be easily changed, at least in the short run. This
orientation is also known as the “output-augmenting” approach: it
keeps the inputs bundle unchanged and expands the output level
6 €re and
For an in-depth description of DEA, see also Charnes et al. [10]; Fa
Grosskopf [31] and Coelli et al. [15].
until the frontier is reached [19]. For what concerns VRS, since the
organization of the CTPs is established by law and is thus funda-
mentally the same throughout Italy, we can assume that any het-
erogeneity among CTPs e hence, variable returns to scale e
essentially depends on the performance of the various procedural
stages, which is in turn related to individual effort and overall
management. In other words, the key element to foster efficiency is
the human factor, which determines how well each individual task
is completed and how well the overall procedure is managed. This
assumption is in line with the findings of previous studies, which
ascribe heterogeneity in judicial efficiency to the characteristics of
judges (e.g., education) and to their individual incentives. The
innovative aspect of our approach is that, unlike the empirical
literature on court efficiency mentioned above, we take VRS into
account.7
In accordance with Simar and Wilson [73]; we apply the boot-
strap procedure to the DEA approach to correct for the bias in the
efficiency scores and their confidence intervals. Basically, the
bootstrap procedure is a sub-sampling mathematical technique
allowing more robust estimates. An algorithm extracts randomly
sub-samples from the whole initial sample and it replies results for
a specific number of replications. The final value is equal to the
mean of these results, which is more robust and correct than that
obtained with the non-bootstrapped method. In this case study,
authors apply a number of replications equal to 200.
In order to analyze the determinants of judicial efficiency, we
also implement the two-stage approach, as suggested by the above
authors. In the first stage, the output-oriented DEA procedure with
bootstrap is used to estimate the efficiency of each CTP. In the
second stage, a regression analysis, also with bootstrap, is carried
out in order to detect correlations between the efficiency scores
and some key explanatory variables.
The output of the model is the number of cases settled (i.e., the
number of cases resulting in a sentence or court order). The input
variables of DEA are all the factors that might affect court pro-
ductivity in this particular context (i.e., number of judges) and the
demand for justice (number of cases pending on January 1st of each
year and number of incoming cases).8 Staff numbers are not
available and, for this reason, they have not been introduced in the
model as input. Even if the absence of clerks might represent a limit
of our analysis, the proposed approach is coherent with literature
on the Italian judicial efficiency [30,41,56].
According to the proposed approach, the efficiency score of a
CTP is defined as its ability to meet the demand for justice, i.e. to
maximize the number of cases settled taking the available re-
sources into account.
4.2. Malmquist index
The Malmquist index, is a method for assessing changes in
productivity and decomposing them into their main elements
[38,49,54,57], which has been applied in several fields such as, for
example, in education [46,61], energy efficiency [78] or health care
[36,63].
This index is used to compute the ratio between outputs and
€re and
inputs at different times. According to Fare et al. [32]; Fa
Grosskopf [31]; assuming the availability of data on a single input
7
The null hypothesis of constant returns to scale (CRS) was tested according to
Simar and Wilson [72]; and we can reject the hypothesis that there is no relation
between the size of courts and their performance. In other words, we can confirm
the hypothesis that court heterogeneity can affect their efficiency.
8
In other words, the ‘caseload’ input consists of the backlog plus yearly incoming
cases.
 G. Falavigna et al. / Socio-Economic Planning Sciences 62 (2018) 31e43 35

(x) and output (y) over two periods (t and tþ1), the Total Factor to scale. It is possible to compute this index in the following
Productivity (TFP) can be defined as: manner:
!

yVRS f VRS ðxt Þ
ytþ1 xtþ1 pure eff ¼ tþ1
$ t VRS
TFP ¼ VRS ðx
ftþ1 Þ yt
yt =xt tþ1

It is thus possible to determine how the Malmquist index of

productivity changes in the following manner:  Change in scale efficiency (scale), which considers the changes in

ytþ1 !    
1 =
  ytþ1 2
ytþ1 ft ðxt Þ f ðx Þ f ðxt Þ
1
=
2
ftþ1 ðxtþ1 Þ ft ðxtþ1 Þ
M0 x tþ1
;y tþ1 t
;x ;y t
¼ yt $ yt ¼ $ $ tþ1 tþ1 $ tþ1
ftþ1 ðxtþ1 Þ yt ft ðxtþ1 Þ ft ðxt Þ
ftþ1 ðxt Þ ft ðxt Þ ffl{zfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl} |fflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl{zfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl}
|fflfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl
Change in Efficiencyðeff Þ Technical ChangeðtechÞ

Values of the Malmquist index higher than 1 represent im- efficiency by varying the returns to scale. It is possible to
provements in productivity. The components of the Malmquist compute this index in the following manner:
index are built as distance ratios. The first component describes
! !
changes in efficiency from t to tþ1; this factor is called Efficiency yCRS
tþ1
VRS ðx
ftþ1 tþ1 Þ yVRS
t ftCRS ðxt Þ
Change or Change in Efficiency (eff). The second component is scale ¼ CRS ðx
, , VRS ,
ftþ1 tþ1 Þ yVRS
tþ1 ft ðxt Þ yCRS t
referred to as Technical Change or Change in Technology (tech), and it
represents the shift in technology from the old to the new frontier
between t and tþ1. In particular, the first component (eff) repre-  Pure technical change (pure_tech), which measures the real shift
sents the ability of a production unit e in the tax judiciary, a CTP e in the technology between t1 and t2, it being the geometric
to reach the frontier of time t with the inputs of time tþ1. In other mean of the two ratios of technological changes from the
words, this index indicates the ability of a court to exploit the re- perspective of the DMU at time t1 and time t2. This index cor-
sources available at tþ1, leaving the other conditions at time t responds to Technologic change (tech) but considers variable
unchanged. The technical change component (tech) indicates im- returns to scale. It is possible to compute this index in the
provements in unit productivity moving from the frontier at t to the following manner:
current position. For the purposes of our study, this component
represents the ability of a court to rearrange the organization of its " ! !#1 2 =
VRS ðx VRS ðx Þ
work, i.e. to exploit the inputs at time tþ1 in a different way, ftþ1 tþ1 Þ ftþ1 t
pure tech ¼ , VRS
improving or worsening its position in relation to the frontier at t. ftVRS ðxtþ1 Þ ft ðxt Þ
Based on the above explanation, the Total Factor Productivity (tfp)
between t and tþ1 can thus be rewritten by using the product of
Change in Efficiency and Change in Technology:  Change in scale of technology (scale_tech), which is the residual
and is difficult to interpret. Simar and Wilson [71] conclude that
values > 1 indicate a flattening of the technology, whereas the
tfpt;tþ1 ¼ Mt;tþ1 ¼ eff t;tþ1 $techt;tþ1 index presents an increase in the curvature of the technology.
This is obtained as the product of Change in efficiency (eff) and
In general, the tfp computation presents limitations related to Change in pure efficiency (pure_eff). It is possible to compute this
the determination of technology, which can only be an index in the following manner:
approximation.
Following the current literature (e.g. [1,37,45,53], the aim of this " #1 2
=
CRS ðx VRS ðx Þ f CRS ðx Þ
paper is to focus on the most applied decomposition, i.e. Change in ftVRS ðxtþ1 Þ ftþ1 tþ1 Þ ft t tþ1 t
scale tech ¼ , , ,
Efficiency (eff) and Change in Technology (tech). Indeed, these in- ftCRS ðxtþ1 Þ ftþ1
VRS ðx
tþ1 Þ ft
CRS ðx Þ f VRS ðx Þ
t tþ1 t
dexes consider Constant Returns to Scale (CRS), which assume that,
by varying the time, the returns of each DMU do not change. This
allows the authors to consider – in the regression model – the ef-  SCH, which is the product of Change in scale efficiency and
fects on the dependent variable without noise due to changes in Change in scale of technology. It is possible to compute this index
returns to scale [39]. However, other factorizations have been in the following manner:
suggested by the literature: FGNZ [33], RD [66], SW [71] and WW
[79].9 In order to calculate these factorizations, we need to consider " #1 2 =

the following features:

yCRS
tþ1 yt
VRS f VRS ðx
t
CRS VRS
tþ1 Þ ftþ1 ðxt Þ ftþ1 ðxtþ1 Þ ft
CRS ðx Þ
t
SCH ¼ CRS , VRS CRS , VRS , CRS ,
yt ytþ1 ft ðxtþ1 Þ ftþ1 ðxt Þ ftþ1 ðxtþ1 Þ ftVRS ðxt Þ
 Change in pure efficiency (pure_eff), which captures the true
Once these factors are defined (i.e., Change in pure efficiency,
change in efficiency for the ith unit between t1 and t2. It is the
Change in scale efficiency, Pure technical change, Change in scale of
same as Change in efficiency (eff) but it considers variable returns
technology, SCH), the literature shows how to calculate the afore-
mentioned decompositions of the Malmquist indexes: FGNZ
9
These factorizations can shed light on why a DMU, in our case a CTP, changes its
(pure_eff * scale * tech), RD (pure_eff * pure_tech * SCH), SW (pure_eff
efficiency score, considering not only constant returns to scale but also variable * pure_tech * scale * scale_tech) and WW (pure_eff * pure_tech * scale
ones. * scale_tech). According to [39], even if these decompositions can
36 G. Falavigna et al. / Socio-Economic Planning Sciences 62 (2018) 31e43
Table 1
Descriptive statistics of efficiency scores, inputs and output. Italian 1st instance courts (2009e11).
Type Variable Obs. 2009
Mean
Inputs Judges 103 29
Pending cases 103 5323
Incoming cases 103 2885
Output Resolved cases 103 2591
provide additional information, their interpretation is quite critical.
Finally, note that the Malmquist indexes are calculated on DEA
efficiency scores. Yet, when adopting another measure of radial
distance such as, for example, the Directional Distance Function
(DDF), the literature suggests revising these measures and applying
the Malmquist-Luenberger productivity indexes (e.g., [22,23,39].
According to Coelli et al. [15] and Cooper et al. [17]; frontiers are
computed via the Data Envelopment Analysis methodology with
output orientation. In this way, the calculated Technical Efficiency
score measures the increase in output needed to achieve full effi-
ciency.10 Finally, in order to calculate the Malmquist indexes and
their decompositions, this research uses the FEAR package for R-
statistics vers. 2.14.2 [70], applying the bootstrap procedure with a
number of replications equal to 2000.
The next section presents data and some descriptive statistics
regarding the computed indexes and scores, in order to assess the
impact of the policy on the productivity and judicial efficiency of
CTPs.
5. Data and descriptive statistics
Table 1 presents descriptive statistics of inputs and output. Data
about judges, pending cases on January 1st of each year, incoming
cases, as well as resolved cases are extracted from the annual report
of the Italian Ministry of Economy and Finance (MEF) in charge of
administering tax justice. Based on data availability, the 103 courts
are analyzed in relation to the 2009e2011 period. Since the
Malmquist index assesses changes, its estimation concerns two
different years, i.e. 2009 and 2011, while the technical efficiency
scores are estimated for every single year.
In order to improve the readability of the results, although the
data are calculated at the provincial level (per CTP), they are here
aggregated at the regional level, with the only exception of two
autonomous provinces e i.e., Trento and Bolzano, which enjoy a
quasi-regional status granted by the Italian Constitution. Moreover,
in order to help the reader interpret the maps reported below
(Fig. 1), the Italian regions are grouped into five macro areas (North-
West, North-East, Center, South, and Islands).
Hence, Table 2 reports the technical efficiency scores by region
(that is to say, considering the average CTP for every Italian region)
for each year analyzed. The range of the calculated Technical Effi-
ciency scores (TE) is TE2½1; ∞Þ, where 1 means that the regional
CTPs system is on the efficiency frontier, while TE > 1 indicates that
judicial inefficiency becomes proportionally worse.
As easily seen, conclusions about the impact of the policy are not
straightforward. The figures for each region vary from year to year
and some adjustments in the production organization do seem to
take place. However, it should be highlighted that the TE scores are
estimated as the radial distance of every DMU from the production
frontier, and this changes every year. Accordingly, the values dis-
played in the three columns are not directly comparable and the
10
The calculation of the Malmquist index starting from the DEA approach is
exhaustively discussed in Coelli [14].
2010 2011
St. Dev. Mean St. Dev. Mean St. Dev.
33 26 30 24 28
12324 5609 12170 5767 12455
4897 2824 4773 2524 4093
4751 2640 4420 2384 4032
only comparison that can be made regards efficiency across
different regions in the same year. Hence, we cannot gather any
significant information concerning the effects of the public policy.
By contrast, the Malmquist index makes it possible to examine the
results in greater depth and to obtain further indications about the
effects of the policy.
Table 3 illustrates the statistics on Total Factor Productivity,
calculated through the Malmquist index (tfp) and decomposed into
Change in Efficiency (eff) and Change in Technology (tech), over the
same time period (geometrical mean). The table clearly shows that
in a number of cases the new policy has indeed boosted produc-
tivity e as also shown by the comparison of TE scores within each
region in Table 2 e, since the Malmquist index is greater than 1 in
Lombardy and Piedmont (North-West), Lazio and Tuscany (Center),
Abruzzi, Molise, and Basilicata (South), and Sicily (Islands). Yet, the
Malmquist index allows us to draw further conclusions and attain a
deeper understanding of what has happened. The policy has
reduced the number of active sections, which implies that the
production structure of the courts in the abovementioned regions
was most likely oversized and not working at full capacity. Logi-
cally, a reduction in sections has indeed fostered a rationalization of
the judges' tasks and possibly the reorganization of the courts
(when tech > 1). In most of the aggregated observations (13 out of
21), however, the policy has not had the same effect, as confirmed
by the Malmquist index being smaller than 1. The decomposition
into change in efficiency and change in technology offers further
elements to understand the reasons behind this.
In most of the cases in which there has been an increase in
productivity (Malmquist index > 1), eff > 1 or both eff > 1 and
tech > 1. This implies that a reduction in inputs has often deter-
mined a better use of the remaining resources. It is equally relevant
to note that the policy has led to generalized technical change e i.e.,
a reorganization of the courts (14 out of 21 regional CTP systems).
Nevertheless, only in one case (Basilicata) has the change in tech-
nology been of such magnitude as to exceed the change in effi-
ciency and produce a net productivity increase (i.e., the Malmquist
index is greater than 1).
Fig. 1 provides a disaggregated representation (court by court),
mapping the Malmquist index and its components across Italy. The
white areas correspond to the CTPs in which the values are lower
than 1, while the colored areas correspond to values greater than 1,
with two different degrees of intensity (pink indicates a moderate
increase, while red indicates a substantial increase).
As easily seen, there is an almost perfect overlap between the
map showing the distribution of the Malmquist index and the map
referring to efficiency change, which thus appears to be the main
determinant of the former. 50 out of 103 CTPs (i.e., slightly less than
50%) display a Malmquist index higher than 1, and a similar pattern
emerges for what concerns eff > 1 (48 out of 103 CTPs), although
there is a generalized shock in technical change since almost 77% of
the CTPs (i.e., 79 out of 103) have scores higher than 1.
Indeed, reducing the number of sections has fostered a change
in technology almost everywhere, which confirms the policy's
effectiveness in triggering production organization improvements.
 G. Falavigna et al. / Socio-Economic Planning Sciences 62 (2018) 31e43 37

Fig. 1. Mapping of the Malmquist productivity index and its components (Change in Efficiency and Change in Technology) Italy, 2009e2011.

Table 2 productivity, since human work (thus, the number of judges) still
Descriptive statistics of the technical efficiency scores. remains a pivotal factor which can lead to an increase in produc-
Region Macro-area 2009 2010 2011 tivity, albeit only to a certain upper limit. Accordingly, a policy
aimed at enhancing productivity should focus on the judges and
Liguria North-West 1.3875 1.8919 1.6810
Lombardy North-West 1.2719 1.4031 1.1785 include appropriate incentives to be devised for each situation,
Piedmont North-West 1.5646 1.7045 1.3978 given that a generalized policy is unlikely to have the same effects
Aosta Valley North-West 1.2383 1.4369 1.2320 in different contexts.
Emilia Romagna North-East 1.4824 1.6587 1.5289
A complementary result is observed when testing the relation-
Friuli Venetia Giulia North-East 1.3049 1.7050 1.5699
Autonomous Province of Bolzano North-East 1.2066 1.3304 1.2476 ship between the reduction in sections, on the one hand, and the
Autonomous Province of Trento North-East 1.6775 2.2350 2.4240 Malmquist index (with its components) and technical efficiency
Veneto North-East 1.3119 1.6253 1.4648 scores, on the other hand. This is presented in the following section,
Lazio Center 1.5620 2.2382 1.5035 which tries more directly to determine whether improvements in
Marche Center 1.5966 2.2600 1.9849
the organization of the courts can foster productivity regardless of
Tuscany Center 1.4831 1.8751 1.4506
Umbria Center 1.1345 1.2105 1.1355 the role played by the judges, keeping the other resources (i.e., staff,
Abruzzi South 1.8258 1.4366 1.1020 ICT, etc.) unchanged.
Basilicata South 1.4010 1.8166 1.5308 Table 1 of the Appendix presents further descriptive statistics of
Calabria South 1.7610 2.6674 1.8033
Malmquist indexes, showing the other factors (i.e., Change in pure
Campania South 1.2026 1.3210 1.2641
Molise South 1.5985 1.6664 1.4803
efficiency, Change in scale efficiency, Pure technical change, Change in
Apulia South 1.5541 1.8085 1.5749 scale of technology, SCH).
Sardinia Islands 1.6683 2.8098 2.1435
Sicily Islands 1.7808 2.2912 1.2739
Total 1.4933 1.8420 1.4755 6. Second stage e regression models

The second stage analysis is aimed at testing the impact of the

However, in most cases, the policy has not led to an increase in
productivity. When this has happened, the momentum impressed
by technology change has in general been softer than in the case of
eff > 1. This clearly emerges, for instance, when looking at the two
CTPs of Rome and Viterbo in Fig. 1. In these CTPs, tech > 1 (with high
values, confirmed by the red color) but eff < 1; therefore, the overall
effect is at best a slight increase in productivity (the two areas are
pink in the Malmquist index map).
The overall picture seems to indicate that a more productive
organization of the CTPs has been attained and that, in a number of
cases, a better use of the main input (i.e., the judges) was also
desirable. Yet, these effects cannot per se boost judicial
policy on the productivity of the courts, also taking the judges'
effort as well as geographical location into account. The Malmquist
index is the dependent variable of a multiple regression model,
while the technical efficiency score obtained with the DEA is the
dependent variable of a truncated regression model. Table 4 pre-
sents the descriptive statistics of the dependent and independent
variables, for both models.
The first independent variable (sections reduction) is the change
in the number of active sections, which is, of course, generally
negative. It is computed by averaging the number of active sections
on January 1st and December 31st of each year and expressly tries
to capture the effect of the 2008 Ministerial Decree, i.e. to detect
any causal relation between the reduction in sections and changes
38 G. Falavigna et al. / Socio-Economic Planning Sciences 62 (2018) 31e43

Table 3
Descriptive statistics of the Malmquist index and sections variation.

Region Macro-area Malmquist Change in Efficiency Change in Technology Frequency (CTPs) Sections variation

Aosta Valley North-West 0.996 0.993 1.003 1 0

Liguria North-West 0.982 0.972 1.011 4 5
Lombardy North-West 1.017 1.019 0.998 11 16
Piedmont North-West 1.011 1.007 1.003 8 9
Autonomous Province of Bolzano North-East 0.941 0.982 0.958 1 1
Autonomous Province of Trento North-East 0.972 0.962 1.010 1 1
Emilia Romagna North-East 0.999 0.994 1.005 9 8
Friuli Venetia Giulia North-East 0.982 0.986 0.997 4 2
Veneto North-East 0.988 0.993 0.996 7 11
Lazio Center 1.020 1.004 1.016 5 7
Marche Center 0.973 0.966 1.006 4 5
Tuscany Center 1.018 1.007 1.011 10 11
Umbria Center 0.976 0.984 0.991 2 2
Abruzzi South 1.063 1.068 0.995 4 2
Apulia South 0.993 0.982 1.011 5 10
Basilicata South 1.010 0.999 1.011 2 2
Calabria South 0.972 0.980 0.993 5 3
Campania South 0.998 0.992 1.005 5 10
Molise South 1.011 1.004 1.007 2 1
Sardinia Islands 0.964 0.948 1.018 4 2
Sicily Islands 1.028 1.019 1.009 9 3
Total 1.003 0.999 1.004 103 106

Table 4
Descriptive statistics of dependent and independent variables, Malmquist and DEA analyses. Italian 1st instance courts (2009e11).

Variables Malmquist analysis DEA analysis

Mean Std. Dev. Mean Std. Dev.

Dependent Malmquist index 1.003 0.041

Efficiency change 0.999 0.041
Technical change 1.004 0.014
Technical efficiency scores 1.604 0.646
Independent Sections variation 1.024 1.221 6.298 6.976
Hearings per judge 3.839 5.595 22.930 8.701
Cases per judge 26.997 38.920 133.294 81.755
North-West 0.233 0.425 0.233 0.425
North-East 0.214 0.412 0.214 0.412
Center 0.204 0.405 0.204 0.405
South 0.223 0.418 0.223 0.418
Islands 0.126 0.334 0.126 0.334

in productivity, as well as changes in technology and efficiency.
The second (hearings per judge) and third (cases per judge) var-
iables are proxies related to the judges' productivity and the in-
ternal organization of the courts. Hearings per judge is given by the
number of times judges attend hearings (i.e. total number of
hearings multiplied by three, which is the number of judges in a
section) divided by the (total) number of judges in a CTP. Cases per
judge is given by the (total) number of cases discussed divided by
the (total) number of judges in a CTP.11 These variables are good
proxies for the effort judges put into their work, since they measure
both the amount of time spent and the quantity of cases discussed.
The other independent variables concern the classification by
macro-areas (North-West, North-East, Center, South, and Islands of
Italy) and they attempt to capture heterogeneity among CTPs as-
cribable to their geographical location.
6.1. Results for the Malmquist index
Table 5 proposes a multiple regression model with the robust
option. The model is statistically significant (F test) and it is aimed
at testing whether improvements in the organization of the courts
11
Note that these indexes are directly calculated by the MEF and published in its
annual report on the activities of tax courts.
foster productivity, considering the geographical location of each
court and controlling for the judges' performance. The part of the
variance explained by the model (i.e. R2) is between 16% (change in
technology) and 27% (change in efficiency as dependent variable).
Finally, the mean variance inflation factor shows an acceptable
result (2.03).
It is easy to see that the coefficients regarding sections reduction
are statistically significant, although they are positive for the
change in efficiency and negative for the change in technology, and
the magnitude of the former is larger than that of the latter. On the
whole, this means that a reduction in the number of active sections
has had a negative impact on the overall performance of the courts,
although the reorganization of the residual sections has possibly
determined a more effective use of the remaining resources. Hence,
technology does not fully replace the productive role of the judges,
confirming the findings showed in Table 3 and successive figures.
Indeed, findings show that the change in technology can partially
compensate for the reduction in sections, and this effect is greater
in the macro-areas in which the organization of work was originally
weaker. In this regard, the smaller coefficient for the South prob-
ably implies a greater need for catching up in the organization of
work compared to the other macro-areas. In other words, sup-
porting technical change seems to be more appropriate in this area
than elsewhere. Moreover, our findings indicate that fostering
improvements in the organization of the courts should be the
 G. Falavigna et al. / Socio-Economic Planning Sciences 62 (2018) 31e43 39

Table 5 Table 6
Variation in active CTP sections, 2009e11 OLS Model e robust option. Variation in active CTP sections, 2009e11. Truncated regression Model e bootstrap
option (200 replacements), lower level 1, higher level 2.5.
Variables Malmquist Change in Efficiency Change in Technology
Variables TE Score
Sections variationa 0.00749** 0.0103*** 0.00285***
(0.00285) (0.00315) (0.000984) eq1 Sigma
Hearings per judgea 0.000934 0.000900 2.75e-05
Sections variation 0.00906***
(0.000969) (0.000970) (0.000374)
(0.00201)
Cases per judgea 0.000335*** 0.000292** 3.97e-05
Hearings per judge 0.00742***
(0.000116) (0.000124) (6.49e-05)
(0.00286)
North-West 0.0208 0.0315* 0.0111***
Cases per judge 0.00100***
(0.0154) (0.0161) (0.00417)
(0.000305)
North-East 0.00226 0.0154 0.0134***
North-West 0.490***
(0.0138) (0.0152) (0.00495)
(0.0909)
Center 0.0210 0.0238 0.00346
North-East 0.388***
(0.0151) (0.0152) (0.00436)
(0.0926)
South 0.0150 0.0250 0.0102**
Center 0.291***
(0.0159) (0.0164) (0.00423)
(0.0870)
Constant 0.985*** 0.977*** 1.008***
South 0.255***
(0.0141) (0.0154) (0.00425)
(0.0768)
2010 0.211***
F (7,95) 4.68 4.55 2.61 (0.0510)
Prob > F 0.000 0.000 0.016 2011 0.0193
(0.0445)
Number of Courts 103 103 103 Constant 2.089*** 0.321***
R-squared 0.258 0.267 0.158 (0.120) (0.0150)
Robust standard errors in parentheses.
***p < 0.01, **p < 0.05, *p < 0.1. Wald chi2 (9) 65.73
a
These variables estimate the change in the considered period, i.e. the difference Prob > chi2 0.0000
between 2009 and 2011.
Observations 289

Bootstrapped standard errors in parentheses.

target of the policy in selected regions, while in other areas where
work is already efficiently organized it would be more appropriate
to leave the number of sections and judges unchanged. The uneven
results for the various regions (Table 3) strongly suggest avoiding
‘one size fits all’ conclusions, since the expected outcomes seem to
be heavily dependent on local characteristics. As clearly indicated
by Table 3, the policy has worked in the expected direction in 8 out
of 21 regions, meaning that the organization of the courts and of
the judges' work in those regions was probably suboptimal. The
opposite has happened in other regions, which seems to suggest
that the outcome is mostly a random event. Table 5 presents a
general overview and underlines that a reduction in sections has
had a negative impact due to the inability of technical change to
fully compensate for the judges' work. Interestingly, as far as
geographical heterogeneity is concerned, only the change in tech-
nology shows significant coefficients. As mentioned above, this
seems to suggest that, while the main production input, the judges,
has similar effects across different macro-areas, the organization of
the courts is mostly affected by local socio-economic factors.
6.2. Results for the technical efficiency score
The analysis regresses the technical efficiency score on the
covariates. Table 6 uses a truncated regression model on a pooled
sample with dummy variables for each year, while Table 7 regards a
multiple regression model on panel data. In both cases the boot-
strap option with 200 replacements is applied and, as a robustness
check, Table 7 also proposes a model with the robust option (col-
umn 2). The use of a truncated regression model in Table 6 follows
the two-stage approach according to Simar and Wilson [73]. Once
again, it is worth reminding that, on the basis of the DEA estimation
performed, efficiency is attained when the score is equal to 1, while
inefficiency grows as the score increases, being the highest value
observed in our sample equal to 2.5. According to the approach
proposed here, 289 observations are analyzed in the empirical
model. The model is statistically significant (F test), and the dis-
tribution of residuals is checked with acceptable results.
***p < 0.01, **p < 0.05, *p < 0.1.
The model confirms the key role of judges within the courts, as
well as the negative impact of the policy. As indicated by the results,
there is a negative relation between the decreasing number of
active sections and the technical efficiency of the CTPs. The data
also show that the productivity of judges, in terms of number of
cases and hearings, is vital for CTP efficiency, coherently with the
previous results. However, no specific effects brought about by
technical change can be identified.
Finally, the aspect of heterogeneity among macro-areas is even
more important. The impact of the geographical location of a court
is statistically significant and extremely high, with major differ-
ences between the North and the South of Italy. Also referring to the
results proposed in Table 5 about change in technology, we can
support the hypothesis that the North of Italy is more efficient than
the South but the reorganization triggered by the policy has started
to reduce the gap.
Table 7 further confirms the key role played by judges within the
courts, as well as the negative impact of the policy and the influ-
ence of geographic location on technical efficiency. As previously
explained, the figures presented here, obtained through a multiple
regression model applying the panel option, provide clear evidence
of strong causality [43]. The model in column 1 implements the
bootstrap option with 200 replacements, while the model in col-
umn 2 applies the robust option. The model is statistically signifi-
cant (F test), and the part of the variance explained by the model is
18% (between) and 13% (overall).
6.3. Discussion
Our results confirm the key role of judges within the courts, as
well as the negative impact of the policy (i.e., a statistically signif-
icant negative relation between the decreasing number of active
sections and the efficiency of the CTPs). Moreover, our findings
clearly show that the productivity of judges is vital for CTP
40 G. Falavigna et al. / Socio-Economic Planning Sciences 62 (2018) 31e43

Table 7 known, while Baumol's cost disease predicts the disappearance of

Variation in active CTP sections, 2009e11. OLS Model with panel option (model 1 labor-intensive activities, this cannot be accepted for the case of
with bootstrap option - 200 replacements; model 2 with robust option).
adjudication, or similar activities, whose role is relevant and not
Variables (1) (2) substitutable for society and the market.
TE Scorea TE Scorea Hence, from a policy viewpoint, there are two options for
solving the conundrum and these are suggested by the observation
Sections variation 0.00989*** 0.00989***
(0.00193) (0.00256) of the Malmquist index. The first viable option is to design a policy
Hearings per judge 0.00630* 0.00630** able to overcome the productivity gap of the courts by promoting,
(0.00326) (0.00295) where possible, the attainment of economies of scales in their in-
Cases per judge 0.000955** 0.000955***
ternal organization. However, as discussed above, there are
(0.000417) (0.000305)
North-West 0.461*** 0.461*** intrinsic limits and the shift in technical change can, at best, apply
(0.0879) (0.104) to activities that are ancillary to judicial decision, i.e. the activities
North-East 0.346*** 0.346*** performed by court staff to prepare and manage cases. Yet, as
(0.0887) (0.112) observed, this type of technical change also seems to have an upper
Center 0.257*** 0.257***
boundary. Therefore, another type of technical change might be
(0.0750) (0.0989)
South 0.233*** 0.233*** considered, i.e. a change able to maximize the essentially steady
(0.0630) (0.0867) productivity of judges, which would, per se, remain the same. This
Constant 2.111*** 2.111*** change will not affect the number of decisions reached per judge
(0.124) (0.138)
but the scope that every decision has by changing the legal ma-
chinery (and not only the internal organization of the courts). The
Wald chi2 (7) 70.40 41.46
Prob > chi2 0.0000 0.0000 basic idea is that, if attaining economies of scale within the courts is
not possible, a viable approach might be to foster the emergence of
R-squared: what has been called “judicial economy” outside the courts, in
Between 0.1809 general via procedural amendment [5]. A seminal case of this is
Overall 0.1259
found in civil procedure: introducing the possibility of aggregating
distinct legal claims or specific parts of a litigation can lead courts to
Observations 289
Number of courts 101 the attainment of something similar to economies of scale. While
the main example of this is class action e a device allowing the joint
Standard errors in parentheses.
***p < 0.01, **p < 0.05, *p < 0.1.
vindication of a large number of claims e, other procedural solu-
a
Observations with a score between 1 and 2.5. tions exist, bringing together legal actions which “involve a com-
mon question of law or fact [and in which] the court may: (1) join
for hearing or trial any or all matters at issue in the actions; (2)
efficiency, in terms of number of cases and hearings, as well as the consolidate the actions; or (3) issue any other orders to avoid un-
existence of a strong geographical heterogeneity. necessary cost or delay” (Rule 42a, US Code of Civil Procedure, 2009
These results are robust since they are coherent with all the edition). The simple idea here is that, by redrawing the boundaries
proposed models. In other words, although different techniques of litigation, although the inputs are kept constant, adjudication
have been adopted (OLS and Truncated regression model, TE scores offers scope for alternative solutions designed to achieve adequate
and Malmquist indexes), the same significant relations are “productive” configurations [7]. This would provide courts with the
confirmed. However, there are also limits and shortcomings, since means to attain economies of scales and overcome Baumol's cost
the results rely on the proposed inputs and their availability, as disease.
highlighted in the methodology section. Indeed, CTP staff numbers The validity of the above approach clearly emerges when the
are not available and, for this reason, they have not been introduced workings of the courts are unraveled and thoroughly investigated
in the model as input. Further studies might support our analysis by by means of the Malmquist index. The data observed allow us to
including clerks among the inputs, provided that data become conclude that the EU recommendation that the judiciary should be
available. provided with “adequate financial and human resources”12 appears
What about the meaning of these results in comparison with to be a necessary yet insufficient condition. Simply increasing
literature findings? The overall results illustrated above perfectly fit expenditure or resources will plausibly be as ineffective as reducing
with our hypothesis that adjudication is a labor-intensive activity them. These hypotheses might be tested more extensively by
and, although fine-tuning their organization can indeed enhance comparing the behavior and strategies of non-professional judges
the productivity of the courts, the role of the judges still remains with respect to opportunity costs (i.e., a proxy of the aforemen-
pivotal, as supported by the evidence gathered so far. There might tioned economic incentives). This might be a significant research
indeed be ways to increase the efforts made by judges and a suit- extension of our analysis, able to shed new light on this sensitive
able policy should create incentives aimed at boosting their pro- topic and to lead policy makers to more effective reforms. Taking
ductivity. As Beenstock and Haitovsky [3] observe, fostering the proposed methodology into account, another potential research
productivity only by increasing the number of judges is as inef- stream might concern the adoption of the Malmquist indexes in
fective as reducing the number of sections, due to the judges' other areas of the judiciary such as, for example, civil or criminal
aversion to effort (they are, after all, economic agents like everyone courts. This might be extremely significant in all those countries
else). Without suitable incentive schemes, the appointment of new where structural reforms have been introduced (e.g., [24,42].
judges would simply lead to a reduction in their efforts [62].
Therefore, there is an upper limit beyond which their productivity 7. Conclusions
cannot increase any further. Said limit is inherently connected with
the human nature of the input, which cannot keep up with the This paper applies the technical efficiency score and Malmquist
productivity growth of an economy where capital intensive inputs
are relevant. This phenomenon is known as Baumol's cost disease,
which positively applies to the scenario analyzed here [2]. As is well 12
COM(2013) 160 final, p. 16.
 G. Falavigna et al. / Socio-Economic Planning Sciences 62 (2018) 31e43 41

index to evaluate the impact of a public policy (involving cuts to the
courts' production lines) on the productivity of the Italian tax
judiciary. In particular, the use of the Malmquist index allows
decomposing productivity change into its main components in
order to ‘access the black box’ of adjudication and provide valuable
insights that are essential for policy-making. By contrast, the
absence of these elements can negatively affect policy-making,
which thus fails to grasp the core of the problem and is unable to
implement actions consistent with its objectives.
result also emerges: the application of the tools of production
theory to tax courts and more generally to the workings of the
public administration is a crucial step for drafting sensible public
policies, relying upon the proper premises and considering the
relevant mechanisms of the production activity.
Appendix

Table 1
Descriptive statistics of the Malmquist index

Region Macro- Malmquist Change in Change in Change in Pure Change in Scale Pure Technical Change in Scale SCH
area Efficiency Technology efficiency efficiency change Technology

Aosta Valley North- 0.996 0.993 1.003 1.000 0.993 e e e

West
Liguria North- 0.982 0.972 1.011 0.979 0.993 1.005 1.005 0.999
West
Lombardy North- 1.017 1.019 0.998 1.017 1.003 0.994 1.004 1.007
West
Piedmont North- 1.011 1.007 1.003 1.012 0.995 1.007 1.001 0.995
West
Autonomous Province of North- 0.941 0.982 0.958 0.990 0.993 0.955 1.003 0.996
Bolzano East
Autonomous Province of North- 0.972 0.962 1.010 0.953 1.009 1.012 0.998 1.008
Trento East
Emilia Romagna North- 0.999 0.994 1.005 1.000 0.994 0.998 1.007 1.001
East
Friuli Venetia Giulia North- 0.982 0.986 0.997 0.979 1.006 1.003 1.001 1.002
East
Veneto North- 0.988 0.993 0.996 0.998 0.994 0.991 1.005 0.999
East
Lazio Center 1.020 1.004 1.016 1.011 0.993 1.003 1.013 1.005
Marche Center 0.973 0.966 1.006 0.977 0.989 0.998 1.008 0.997
Tuscany Center 1.018 1.007 1.011 1.008 0.999 1.004 1.007 1.006
Umbria Center 0.976 0.984 0.991 0.991 0.993 0.977 1.015 1.008
Abruzzi South 1.063 1.068 0.995 1.074 0.995 0.988 1.007 1.002
Apulia South 0.993 0.982 1.011 0.998 0.984 0.992 1.019 1.003
Basilicata South 1.010 0.999 1.011 0.996 1.004 1.010 1.001 1.004
Calabria South 0.972 0.980 0.993 0.986 0.993 0.995 1.005 0.996
Campania South 0.998 0.992 1.005 1.006 0.986 0.991 1.014 1.001
Molise South 1.011 1.004 1.007 1.006 0.998 1.005 1.003 1.001
Sardinia Islands 0.964 0.948 1.018 0.962 0.986 1.005 1.013 0.998
Sicily Islands 1.028 1.019 1.009 1.041 0.979 0.994 1.015 0.994
Total 1.003 0.999 1.004 1.005 0.994 0.997 1.008 1.001

Our findings suggest that it is indeed possible to increase judi- References

cial productivity by reorganizing the courts (change in technology)
and/or by using the main input (the judges' work) more effectively.
These two components are complementary rather than substitut-
able. Furthermore, however improved, technology cannot replace
the pivotal role of judges in producing decisions, as adjudication
mainly remains a labor-intensive activity, suffering the typical
problems caused by Baumol's cost disease. In other words, the
analysis based on the Malmquist method clearly shows the limits of
both components in enhancing productivity and provides guide-
lines to develop policies relying on a different approach. If it proves
impossible to attain economies of scale within the production fa-
cilities, given the peculiar nature of adjudication and its complex
organization, policy-makers must necessarily look for new ap-
proaches to introduce productivity shocks from the outside, such as
procedures able to maximize the effect of every single decision,
thus reintroducing economies of scale in an unusual way.
This study confirms that generalized policy measures are most
likely unable to lead to consistent results, since the outcome of the
policy analyzed here displays different signs for different local court
systems. It also shows that the lack of appropriate analytical tools
makes it impossible to grasp the deeper meaning of changes in
productivity and can lead to ambiguous choices. An additional
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