Assessing and Explaining the Relative Efficiency of Local Government: Evidence for Portuguese Municipalities

ISEG Economics Working Paper 19/2005/DE/UECE

41 Pages Posted: 16 Dec 2005

See all articles by António Afonso

António Afonso

University of Lisbon - ISEG (School of Economics and Management); UECE (Research Unit on Complexity and Economics); ISEG Lisbon School of Economics and Management,Universidade de Lisboa

Sónia Fernandes

Technical University of Lisbon

Date Written: November 2005

Abstract

In this paper we measure the relative efficiency of Portuguese local municipalities in a non-parametric framework approach using Data Envelopment Analysis. As an output measure we compute a composite local government output indicator of municipal performance. This allows assessing the extent of municipal spending that seems to be "wasted" relative to the "best-practice" frontier. Our results suggest that most municipalities could achieve, on average, the same level of output using fewer resources, improving performance without necessarily increasing municipal spending. Inefficiency scores are afterwards explained by means of a Tobit analysis with a set of relevant explanatory variables playing the role of non-discretionary inputs.

Keywords: local government, expenditure efficiency, technical efficiency, DEA, Tobit models

JEL Classification: C14, C34, H72, R50

Suggested Citation

Afonso, António and Fernandes, Sónia, Assessing and Explaining the Relative Efficiency of Local Government: Evidence for Portuguese Municipalities (November 2005). ISEG Economics Working Paper 19/2005/DE/UECE, Available at SSRN: https://ssrn.com/abstract=849247 or http://dx.doi.org/10.2139/ssrn.849247

António Afonso (Contact Author)

University of Lisbon - ISEG (School of Economics and Management) ( email )

R. Miguel Lupi, 20
Lisbon, 1248-078
Portugal
+351 21 392 5985 (Phone)
+351 21 396 6407 (Fax)

HOME PAGE: http://https://www.iseg.ulisboa.pt/aquila/homepage/aafonso

UECE (Research Unit on Complexity and Economics)

Rua Miguel Lupi 20
Lisbon, 1249-078
Portugal
+351-213 925 912 (Phone)
+351-213 971 196 (Fax)

HOME PAGE: http://https://uece.rc.iseg.ulisboa.pt/

ISEG Lisbon School of Economics and Management,Universidade de Lisboa ( email )

Rua do Quelhas 6
LISBOA, 1200-781
Portugal

Sónia Fernandes

Technical University of Lisbon ( email )

R. Miguel Lupi, 20
Lisbon, 1200
Portugal

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