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Performance Evaluation of Urban Local Governments: A Case for Indian Cities

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  • Simanti Bandyopadhyay

    ()
    (Indian Council For Research On International Economic Relations)

Abstract

The paper assesses the performances of the urban local bodies in the state of Karnataka in India.We use non parametric Data Envelopment Analysis as a tool to measure technical efficiencies of the ULBs. If we compare the services in a particular size class of city with the norms we find that in the smallest size class it is water supply which has the minimum shortfall from norms, in the medium size cities it is road density which is closest to the norms and in the largest city size class it is the solid waste management which performs the best with zero shortfall from norms. On an average for all the services there is a shortage of 57 per cent of the ONM expenditure norms, the shortage being the highest (64 per cent) in the biggest size class of cities. If we compare across size classes we find that bigger cities have on an average higher proportions of ONM expenditures while both salary and establishment components show higher proportions in smaller cities. This is indicative to the fact that bigger cities are incurring more productive expenses than the smaller ones. We find that the overall average collection efficiency of property taxes is only 62 per cent which is the lowest in the smallest size class and the highest in the medium size class with little variation across cities. We find that only 27.5 per cent of the ONM expenditure requirements can be fulfilled by the own revenues once the potential for the latter is fully realised. This proportion is higher in bigger cities with moderately high variation across cities. As far as the ONM cost coverage is concerned we find that on an average the ULBs in Karnataka can finance 50 per cent of the ONM costs on basic services through their own revenues with a very high variation in the proportions across cites. We find that the ULBs on an average can reduce 27 per cent of their expenditures on ONM, labor and establishment to provide the same levels of services provided currently by them. We also find that there can be additional savings particularly on establishment and labor expenditures to operate at the maximum efficiency levels. We find that the extent of problem of unproductive spending and under-provision of services is more pronounced in smaller cities.

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Paper provided by International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University in its series International Center for Public Policy Working Paper Series, at AYSPS, GSU with number paper1232.

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Length: 50 pages
Date of creation: 20 Oct 2012
Date of revision:
Handle: RePEc:ays:ispwps:paper1232

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  1. Deller, Steven C, 1992. "Production Efficiency in Local Government: A Parametric Approach," Public Finance = Finances publiques, , vol. 47(1), pages 32-44.
  2. De Borger, Bruno & Kerstens, Kristiaan, 1996. "Cost efficiency of Belgian local governments: A comparative analysis of FDH, DEA, and econometric approaches," Regional Science and Urban Economics, Elsevier, vol. 26(2), pages 145-170, April.
  3. De Borger, B, et al, 1994. " Explaining Differences in Productive Efficiency: An Application to Belgian Municipalities," Public Choice, Springer, vol. 80(3-4), pages 339-58, September.
  4. M. Govinda Rao & Richard M. Bird, 2010. "Urban Governance and Finance in India," Governance Working Papers 21851, East Asian Bureau of Economic Research.
  5. Bandyopadhyay,Simanti & M. Govinda Rao, 2009. "Fiscal health of selected Indian cities," Working Papers 09/58, National Institute of Public Finance and Policy.
  6. Sole-Olle, Albert, 1997. "Tax Exporting and Redistributive Politics: An Empirical Investigation on the Determinants of the Spanish Local Tax Structure," Public Finance = Finances publiques, , vol. 52(1), pages 102-24.
  7. Afonso, António & Schuknecht, Ludger & Tanzi, Vito, 2003. "Public sector efficiency: an international comparison," Working Paper Series 0242, European Central Bank.
  8. Brueckner, Jan K., 1979. "Property values, local public expenditure and economic efficiency," Journal of Public Economics, Elsevier, vol. 11(2), pages 223-245, March.
  9. Afonso, António & Schuknecht, Ludger & Tanzi, Vito, 2006. "Public sector efficiency: evidence for new EU member states and emerging markets," Working Paper Series 0581, European Central Bank.
  10. Davis, Michael L & Hayes, Kathy, 1993. "The Demand for Good Government," The Review of Economics and Statistics, MIT Press, vol. 75(1), pages 148-52, February.
  11. Simanti Bandyopadhyay, 2011. "Finances of Urban Local Bodies in Jharkhand: Some Issues and Comparisons," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1113, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  12. Ladd, Helen F., 1994. "Fiscal impacts of local population growth: A conceptual and empirical analysis," Regional Science and Urban Economics, Elsevier, vol. 24(6), pages 661-686, December.
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