Comparison of data envelopment analysis and deterministic parametric frontier approaches: an application in the Norwegian road construction sector

Abstract

This paper analyzes efficiency in the Norwegian road sector by using two competing methods. The first is Data Envelopment Analysis (DEA), while the second is Deterministic Frontier Analysis (DFA) with a Cobb‐Douglas kernel specification. Both approaches show similarities with respect to efficiency distribution. The rock‐blasting sectors potential for efficiency improvement is in the range 19–59 percent. Both approaches demonstrate decreasing return to scale properties for the average unit. There is a significant correlation between size and efficiency indicating that larger units perform better than smaller ones. Precautionary blasting mainly performed in densely populated areas is also found to explain much of the variations in efficiency scores. Any policy implication should therefore carefully examine exogenous factors. The main difference between the two approaches, which can be explained by the number of parameters to be determined, concerns level of scores rather than their distribution. However, there are arguments that advocate DEA rather than DFA in the rock‐blasting sector.