The efficient management of the available resources in local governments has been a topic of high interest in the field of public sector. We provide an extensive and comprehensive review of the existing literature on local governments' efficiency from a global point of view, covering all articles from 1990 to August 2016. This paper is the first of two. It covers the basic aspects related to local governments' efficiency measurement not taking into account the effect of environmental conditions. First, we show a detailed overview of the studies investigating public sector efficiency across various countries, comparing the data and samples employed, and the main results obtained. Second, we describe which techniques have been used for measuring efficiency in the context of local governments. Third, we summarize the inputs and outputs used. Finally, we discuss some operative directions and considerations for further research in the field.

The efficient management of the available resources in local governments has been a topic of high interest in the field of public sector. We provide an extensive and comprehensive review of the existing literature on local governments' efficiency from a global point of view, covering all articles from 1990 to August 2016. This paper is the second of two. It covers the aspects related to local governments' efficiency measurement along with its determinants, that is, taking into account the effect of environmental variables over efficiency. First, we describe which techniques have been used to incorporate environmental variables in the context of local governments. Second, we provide a classification for the determinants used and summarize their impact on efficiency. Finally, we discuss some operative directions and considerations for further research in the field.

In the recent years of international economic crisis, Spanish local governments have come under increasing pressure to accommodate severe economic restrictions while maintaining (or even increasing) their provision of local public services. This paper aims to analyse overall cost efficiency in Spanish local governments during the period of the economic crisis (2008-2013) which has scarcely been examined to date. To this end, we measure efficiency, for which we consider four different non-parametric methodologies. Moreover, given how problematic it is to precisely define the bundle of services and facilities that municipalities must provide, we compare three different output models in which we consider measures of quantity as well as quality. Our results suggest that Spanish local government efficiency improved over the crisis period 2008-2013 since budget expenditures (inputs or costs) fell while local public services and facilities (outputs) were maintained. We also find evidence of the possible implications of service quality when measuring local governments' cost efficiency, and of structural differences in the average efficiency between municipalities located in different Spanish regions and provinces. Finally, our results confirm that the level and variation of efficiency scores are affected by the approach taken.

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We analyse overall cost efficiency in Spanish local governments during the crisis period (2008-2015). To this end, we first consider some of the most popular nonparametric methods to evaluate local government efficiency, data envelopment analysis and free disposal hull, as well as recent proposals, namely the order-m partial frontier and the nonparametric estimator proposed by Kneip et al. (Econom Theory 24(6):1663-1697, 2008). Second, to compare the four methods and choose the most appropriate one for our particular context and dataset (local government cost efficiency in Spain), we carry out an experiment via Monte Carlo simulations and discuss the relative performance of the efficiency scores under various scenarios. Our results suggest that there is no one approach suitable for all efficiency analysis. We find that for our sample of 1846 Spanish local governments, the average cost efficiency would have been between 0.5417 and 0.7543 during the period 2008-2015, suggesting that Spanish local governments could have achieved the same level of local outputs with about 25% and 46% fewer resources. Keywords Efficiency • Local government • Monte Carlo simulations • Nonparametric frontiers JEL Classification C14 • C15 • H70 • R15 We thank Víctor Giménez, Diego Prior, and José Luis Zafra for helpful suggestions. We are particularly grateful to two anonymous reviewers whose comments have contributed to improve the overall quality of the paper. All authors acknowledge the financial support of the Ministerio de Economía y Competitividad (ECO2017-88241-R and ECO2017-85746-P), Generalitat Valenciana (PROMETEO/2018/102) and Universitat Jaume I (UJI-B2017-33 and UJI-B2017-14). The usual disclaimer applies.