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Output complexity, environmental conditions, and the efficiency of municipalities: a robust metafrontier approach

  • Emili Tortosa Ausina

    ()

    (Universitat Jaume I)

  • Diego Prior Jiménez

    (Universidad Autónoma de Barcelona)

  • María Teresa Balaguer-Coll

    (Universitat Jaume I)

Over the last few years, many studies have analyzed the productive efficiency of local governments in different countries. An accurate definition of their output bundles -i.e., the services and facilities they provide to their constituencies- is essential to this research. However, several difficulties emerge in this task. First, since in most cases the law only establishes the minimum amount of services and facilities to provide, it may well be the case that some municipalities go beyond the legal minimum and, consequently, might be labeled as inefficient when compared to other municipalities which stick to the legal minimum. Second, municipalities face very different environmental conditions, which raises some doubts about the plausibility of an unconditional analysis. This study tackles these problems by proposing a metafrontier analysis in which the efficiency of municipalities is evaluated after splitting them into clusters according to various criteria (output mix, environmental conditions, size). We perform our estimations using order-m frontiers, given their robustness to outliers and immunity to the curse of dimensionality. We provide an application to Spanish municipalities, and results show that both output mix and, more especially, environmental conditions, should be controlled for, since efficiency differences between municipalities in different groups are notable. Durante los últimos años muchos trabajos han venido analizando la eficiencia productiva de las corporaciones locales de una gran variedad de países. Para este tipo de estudios resulta crucial una definición precisa de los servicios e infraestructuras que los municipios proporcionan a sus ciudadanos. Sin embargo, esta tarea presenta varias dificultades. En primer lugar, dado que en muchas circunstancias la ley únicamente establece los servicios mínimos que debe proporcionar un municipio, puede darse el caso de que algunos municipios vayan más allá de este mínimo legal y, consecuentemente, sean clasificados como ineficientes al compararlos con otros municipios que se ciñen al mínimo. En segundo lugar, las corporaciones locales operan en condiciones ambientales muy dispares, lo cual genera dudas acerca de la factibilidad de un análisis incondicional. Este trabajo aborda estas cuestiones proponiendo un análisis metafrontera en el que la eficiencia de las corporaciones locales se evalúa tras clasificarlas en distintos grupos de acuerdo con criterios múltiples (output mix, condiciones ambientales, tamaño). Las estimaciones son llevadas a cabo utilizando fronteras orden-m, debido a la robustez que presentan frente a observaciones atípicas y la inmunidad a la ¿maldición de la dimensionalidad¿ (curse of dimensionality). Llevamos a cabo una aplicación a los municipios españoles, y los resultados indican que tanto el output mix como, sobre todo, las condiciones ambientales, deberían ser tenidas en cuenta al evaluar la eficiencia, pues las diferencias en la eficiencia de los municipios en los distintos grupos son notables.

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Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie EC with number 2010-02.

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Length: 34 pages
Date of creation: Mar 2010
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasec:2010-02
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  1. Albert Solé-Ollé & Miriam Hortas Rico, 2008. "Does urban sprawl increase the costs of providing local public services? Evidence from Spanish municipalities," Working Papers 2008/6, Institut d'Economia de Barcelona (IEB).
  2. Maria Teresa Balaguer-Coll & Diego Prior & Emili Tortosa-Ausina, . "Devolution Dynamics of Spanish Local Government," Working Paper 201001, Department of Business Economics, Universitat Autonoma de Barcelona.
  3. Balaguer-Coll, Maria Teresa & Prior, Diego & Tortosa-Ausina, Emili, 2007. "On the determinants of local government performance: A two-stage nonparametric approach," European Economic Review, Elsevier, vol. 51(2), pages 425-451, February.
  4. Christopher O’Donnell & D. Rao & George Battese, 2008. "Metafrontier frameworks for the study of firm-level efficiencies and technology ratios," Empirical Economics, Springer, vol. 34(2), pages 231-255, March.
  5. DE BORGER, Bruno & KERSTENS, Kristiaan, 1994. "Cost efficiency of Belgian local governments: A comparative analysis of FDH, DEA and econometric approaches," SESO Working Papers 1994002, University of Antwerp, Faculty of Applied Economics.
  6. Francisco José Goerlich Gisbert & Rafael Pinilla Pallejà, 2009. "Esperanzas de vida libres de discapacidad por sexo y comunidad autónoma: 2004-2006," Working Papers. Serie EC 2009-13, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  7. Cj O'Donnell & G Westhuizen, 2002. "Regional Comparisons of Banking Performance in South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 70(3), pages 224-240, 03.
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