An important problem in the public sector, given the lack of output prices and exit decisions to sanction inefficient units, is finding the optimal industry structure. We apply a novel approach to the Italian courts of justice, the typical example of a sector in the public domain with a small size but important effects on economic agents’ behavior, firm size, FDI, and on the overall economy. The suggested approach allows to decompose the courts inefficiency into different sources and to investigate the optimal structure of the judicial sector. Results show that technical inefficiency (lack of best practice) is almost 40\% of total inefficiency, while size inefficiency (courts that are too big) is about 35\%. The remaining is represented by input reallocation (17\%) and merger (10\%) inefficiencies. Given the relative difficulty of adopting best practices in inefficient courts, we suggest that the single most effective policy intervention would be splitting the biggest courts. We contrast this policy suggestion with the recent Monti’s government decision to merge smaller courts to save on building costs, arguing that these implemented mergers might in fact worsen Italian courts efficiency.
Large Courts, Small Justice! On the inefficiency and optimal structure of the Italian Justice sector
ZAGO, Angelo
2013-01-01
Abstract
An important problem in the public sector, given the lack of output prices and exit decisions to sanction inefficient units, is finding the optimal industry structure. We apply a novel approach to the Italian courts of justice, the typical example of a sector in the public domain with a small size but important effects on economic agents’ behavior, firm size, FDI, and on the overall economy. The suggested approach allows to decompose the courts inefficiency into different sources and to investigate the optimal structure of the judicial sector. Results show that technical inefficiency (lack of best practice) is almost 40\% of total inefficiency, while size inefficiency (courts that are too big) is about 35\%. The remaining is represented by input reallocation (17\%) and merger (10\%) inefficiencies. Given the relative difficulty of adopting best practices in inefficient courts, we suggest that the single most effective policy intervention would be splitting the biggest courts. We contrast this policy suggestion with the recent Monti’s government decision to merge smaller courts to save on building costs, arguing that these implemented mergers might in fact worsen Italian courts efficiency.
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