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Explaining DEA Technical Efficiency Scores in an Outlier Corrected Environment: The Case of Public Services in Brazilian Municipalities

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  • de Sousa, Maria da Conceição Sampaio
  • Cribari-Neto, Francisco
  • Stosic, Borko D.

Abstract

We estimate DEA (Data Envelopment Analysis) technical efficiency scores for nearly five thousand Brazilian municipalities using a recently proposed method that combines bootstrap and jackknife resampling to eliminate the influence of outliers and possible measurement and recording errors in the data. We use both the constant and variable returns to scale variants of the DEA method. After computing the efficiency scores, we use econometric methods to investigate the determinants of those scores. The results reveal that: (a) the level of computer usage (a proxy for administrative capability) tends to have a positive and highly significant impact on efficiency; such gains seem to be greater for the most inefficient municipalities, thus indicating the existence of diminishing marginal benefits; (b) the urbanization rate is also shown to be positively correlated with the efficiency measures; (c) excess spending due to royalty revenues and economies of scale seem to explain why efficiency scores increase with the size of the municipality; (d) municipalities which take part in the Alvorada Program (a federal program for low income communities) tend to display higher efficiency scores than those they would have achieved had they not been included in the project. Additionally, the results show that the more power awarded to municipal councils, the better the effectiveness in resource utilization as measured by efficiency indices. This is because such councils tend to increase the transparency of the budgeting process, hence reducing corruption and the misuse of local funds.

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  • de Sousa, Maria da Conceição Sampaio & Cribari-Neto, Francisco & Stosic, Borko D., 2005. "Explaining DEA Technical Efficiency Scores in an Outlier Corrected Environment: The Case of Public Services in Brazilian Municipalities," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 25(2), November.
  • Handle: RePEc:sbe:breart:v:25:y:2005:i:2:a:2507
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    6. Tommaso Agasisti & Antonio Dal Bianco & Massimo Griffini, 2016. "The public sector efficiency in Italy: The case of Lombardy municipalities in the provision of the essential public services," ECONOMIA PUBBLICA, FrancoAngeli Editore, vol. 2016(1), pages 59-84.
    7. Isabel Narbón-Perpiñá & Kristof De Witte, 2016. "Local governments’ efficiency: A systematic literature review – Part I," Working Papers 2016/20, Economics Department, Universitat Jaume I, Castellón (Spain).
    8. Tommaso Agasisti & Antonio Dal Bianco & Massimo Griffini, 2015. "The public sector fiscal efficiency in Italy: the case of Lombardy municipalities in the provision of the essential public services," Working papers 25, Società Italiana di Economia Pubblica.
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    10. Skica Tomasz & Leśniowska-Gontarz Małgorzata & Miszczyńska Katarzyna, 2019. "Measuring the Efficiency of Polish Municipalities – Data Envelopment Analysis Approach," South East European Journal of Economics and Business, Sciendo, vol. 14(2), pages 54-66, December.
    11. Francesco Aiello & Graziella Bonanno & Luigi Capristo, 2017. "Explaining Differences In Efficiency: The Case Of Local Government Literature," Working Papers 201704, Università della Calabria, Dipartimento di Economia, Statistica e Finanza "Giovanni Anania" - DESF.
    12. Simone Schenkman & Aylene Bousquat & Maria Paula Ferreira, 2022. "Efficiency Analysis in Brazil’s Sao Paulo State Local Unified Health System (SUS): From Gender-Ethnicity-Power Inequities to the Dissolution of Health Effectiveness," IJERPH, MDPI, vol. 19(5), pages 1-22, March.
    13. Francesco Aiello & Graziella Bonanno, 2019. "Explaining Differences In Efficiency: A Meta‐Study On Local Government Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 33(3), pages 999-1027, July.
    14. Constantino Cronemberger Mendes & Maria da Conceicao Sampaio de Sousa, 2006. "Demand for locally provided public services within the median voter's framework: the case of the Brazilian municipalities," Applied Economics, Taylor & Francis Journals, vol. 38(3), pages 239-251.
    15. Kan Wang & Yunpeng Zhang & Li Lei & Shuai Qiu, 2021. "Evaluation on the Efficiency of LED Energy Enterprises in China by Employing the DEA Model," Mathematics, MDPI, vol. 9(19), pages 1-21, September.

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