Service level provision in municipalities: a flexible directional distance composite indicator

With increasing decentralization of public activities to the municipalities, it has become imperative to deploy an enhanced service provision analysis at the local level. This paper suggests the innovative use of a composite indicator to measure the multidimensional aspects of the local public provision comprising of several commonly administered municipal tasks. We propose a robust conditional version of a directional distance composite indicator with weight restrictions based on the municipal expenditure composition. Specifically, we deal with the presence of “undesirable” municipal service indicators and with the heterogeneity among the municipalities in their political preferences, priority public activities and operating environment characteristics. To illustrate the applicability of the suggested method, we show the construction of the municipal service provision composite indicator for 307 Flemish municipalities over the year 2006–2011.