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A Longitudinal Parametric Approach to Estimate Local Government Efficiency

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Abstract

Previous empirical works on municipal efficiency have mostly used cross-sectional data which makes it impossible to separate unobserved heterogeneity from inefficiency. Furthermore, they have also typically used a two stages approach which has been widely criticized as the assumptions made in the first stage are violated in the second stage, generating biased results. We present one of the first longitudinal parametric studies that analyze municipal efficiency and its determinants using a one step procedure. Furthermore, we are the first of this kind that analize overall efficiency as well as efficiency by clusters of municipalities in order to reduce heterogeneity. We use administrative datasets of Chilean municipalities for the 2008-2010 period and our results suggest that Chilean municipalities have on average an inefficiency level of 30% with a significant variance between clusters of municipalities. Also, our results suggest that socio-economic, fiscal and political variables affect municipal efficiency. In particular, we found that municipalities with tighter budget constraints are associated with more efficient municipalities.
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  • Rafael Sanchez & Francisca Pacheco, 2014. "A Longitudinal Parametric Approach to Estimate Local Government Efficiency," Working Papers wp_033, Adolfo Ibáñez University, School of Government.
  • Handle: RePEc:uai:wpaper:wp_033
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    1. Geys, Benny & Heinemann, Friedrich & Kalb, Alexander, 2010. "Voter involvement, fiscal autonomy and public sector efficiency: Evidence from German municipalities," European Journal of Political Economy, Elsevier, vol. 26(2), pages 265-278, June.
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    8. Angel Prieto & José ZofIo, 2001. "Evaluating Effectiveness in Public Provision of Infrastructure and Equipment: The Case of Spanish Municipalities," Journal of Productivity Analysis, Springer, vol. 15(1), pages 41-58, January.
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    Cited by:

    1. Isabel Narbón-Perpiñá & Mª Teresa Balaguer-Coll & Marko Petrovic & Emili Tortosa-Ausina, 2017. "Which estimator to measure local governments’ cost efficiency? An application to Spanish municipalities," Working Papers 2017/06, Economics Department, Universitat Jaume I, Castellón (Spain).
    2. 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).
    3. Isabel Narbón-Perpiñá & Kristof De Witte, 2016. "Local governments’ efficiency: A systematic literature review – Part II," Working Papers 2016/21, Economics Department, Universitat Jaume I, Castellón (Spain).

    More about this item

    JEL classification:

    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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