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Peas in a Pod: Are Efficient Municipalities also Financially Sustainable?

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  • Joseph Drew
  • Brian Dollery
  • Michael A. Kortt

Abstract

Are efficient councils financially sustainable? We argue that an efficient council may not necessarily be financially sustainable. Our subsequent empirical analysis finds limited evidence in favour of an ‘efficiency–sustainability’ nexus. Thus, policies aimed at improving a council's efficiency may not automatically enhance their financial sustainability. Public policy makers have principally focused on improving the operational efficiency of local government on the presumption that this will result in a more financially sustainable sector. We argue that it is erroneous to assume that an efficient local government entity will necessarily be more fiscally sustainable. To test this argument, we apply an innovative method for empirically testing the association between financial sustainability and operational efficiency to the New South Wales local government system. Our results suggest limited positive associations between financial sustainability measures and municipal efficiency.

Suggested Citation

  • Joseph Drew & Brian Dollery & Michael A. Kortt, 2016. "Peas in a Pod: Are Efficient Municipalities also Financially Sustainable?," Australian Accounting Review, CPA Australia, vol. 26(2), pages 122-131, June.
    • Handle: RePEc:bla:ausact:v:26:y:2016:i:2:p:122-131
    DOI: 10.1111/auar.12098
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    References listed on IDEAS

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    Cited by:

    1. Tommaso Agasisti & Francesco Porcelli, 2019. "Local governments’ efficiency and its heterogeneity – empirical evidence from a Stochastic Frontier Analysis of Italian municipalities 2010-2015," Working papers 81, Società Italiana di Economia Pubblica.
    2. Acuff, Christopher, 2023. "More Money or More Problems? Assessing the Fiscal Impact of Consolidation in Macon-Bibb County, Georgia," SocArXiv as3pb, Center for Open Science.
    3. Stewart Jones & Nurul Alam, 2019. "A machine learning analysis of citation impact among selected Pacific Basin journals," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 59(4), pages 2509-2552, December.

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