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

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

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)

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

Rua do Quelhas 6
LISBOA, 1200-781
Portugal

HOME PAGE: http://https://www.iseg.ulisboa.pt/

UECE (Research Unit on Complexity and Economics) ( email )

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

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

REM - Research in Economics and Mathematics ( email )

ISEG, Universidade de Lisboa
Rua Miguel Lupi, 20
Lisboa, 1249-078
Portugal

HOME PAGE: http://rem.rc.iseg.ulisboa.pt/

Sónia Fernandes

Technical University of Lisbon ( email )

R. Miguel Lupi, 20
Lisbon, 1200
Portugal

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