This article analyzes the efficiency of Comunitat Valenciana (Spain) local governments and their main explanatory variables. The analysis is performed in two stages. Firstly, efficiency is measured via (nonparametric) activity analysis techniques. The measurement techniques also enable the sources of inefficiency to be identified, i.e., whether inefficiencies are primarily overall cost, technical, or allocative. The second stage identifies some critical determinants of efficiency, focusing both on political and fiscal policy variables. In contrast to previous two-stage research studies, our approach performs the latter attempt via nonparametric smoothing techniques, rather that econometric methods -such as OLS or Tobit related. Results show that inefficiencies are largely attributable to allocative factors, resulting in a notable gap between cost and technical efficiency. Inefficiencies are also larger for small municipalities. However, they are not exclusively attributable to poor management, as second-stage analysis reveals both fiscal and policy variables, either within or outside local governments control, to be explicably related to municipalities' performance. KEYWORDS:efficiency, kernel smoothing, local government, nonparametric regression.JEL classification: D24, D60, H71, H72. RESUMENEste trabajo analiza la eficiencia de las corporaciones locales de la Comunidad Valenciana y sus factores determinantes. El análisis se lleva a cabo en dos etapas. En primer lugar, la eficiencia es medida a través de técnicas (no paramétricas) de análisis de la actividad. El empleo de este tipo de técnicas permite también identificar las fuentes de ineficiencia, esto es, si esta es básicamente en costes, técnica o de carácter asignativo. La segunda etapa identifica algunos determinantes clave de la eficiencia, centrándose tanto en variables políticas, así como de política fiscal. Frente a estudios previos en dos etapas, nuestro enfoque lleva a cabo este último objetivo a través de técnicas no paramétricas de suavizado, en lugar de métodos econométricos (tales como MCO o modelos Tobit). Los resultados indican que las ineficiencias son atribuibles en gran parte a factores asignativos, dando lugar a un margen considerable entre eficiencia en costes y eficiencia técnica. La ineficiencia también es mayor para las corporaciones locales más pequeñas. Sin embargo, no es atribuible exclusivamente a una gestión deficiente, pues el análisis de segunda etapa muestra que tanto las variables políticas como las de política fiscal, independientemente de si están o no bajo el control de las corporaciones locales, se hayan relacionadas con su nivel de eficiencia.

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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. Keywords: efficiency, environmental conditions, local government, metafrontier, order-m JEL Classification: D24, D60, H71, H72 ResumenDurante 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 eva...

This paper analyzes the factors that directly influence levels of debt in

IntroductionThe literature on the economic dividend of devolution (that is, the transfer of powers from higher to lower levels of government), has been growing over the last few years. Many factors have prompted its blooming, among which we may highlight three. First, in the case of developed countries, the guises of subsidiarity, devolution, and federalism have prompted its analysis as a central policy issue both in the United States and in several European Union countries (Inman and Rubinfeld, 1997;1998). Second, in the developing world it is at the center of reform efforts not only throughout Latin America and many parts of Asia and Africa but also in several formerly planned economies (Stewart, 2000). Last, but not least, analyzing the links between decentralization and efficiency has been always at the core of public economics, and provides the rationale as to which benefits could arise from decentralizing in developing countries. As recognized by many studies since Tiebout's classic essay (1956), a literature has developed that emphasizes the benefits of political decentralization and the competition that it fosters among regional or local governments (Cai and Treisman, 2004).The literature analyzing the economic dividend of devolution in local government enumerates several advantages, although some downsides also exist. The early contributions date back to the pioneering studies by Tiebout (1956) and Oates (1972), but, given the acceleration of the global trend towards devolution that has occurred over the last thirty years, some recent studies have reassessed its costs and benefits. (1)

This article analyses the debt of local governments taking into account the presence of spatial interactions among neighbouring municipalities. To this end, the S2SLS and Spatial lag models were applied to a sample of 527 municipalities located in the Valencian Community (Spain) for the year 2015. The main results reveal a spatial correlation in outstanding debt among municipalities. The gender of the mayor, the grants and transfers received and the average payment period have direct effects on outstanding debt. In turn, the net savings index, inactive population, local income and the strength of the ruling political party have indirect effects on the municipal debt and indirect spatial effects on the debt of the neighbouring municipalities. Este artículo analiza la deuda de los gobiernos locales teniendo en cuenta la presencia de interacciones espaciales entre los municipios vecinos. Para ello se utiliza una muestra 527 municipios de la Comunidad Valenciana, para el año 2015 y se aplican los modelos espaciales S2SLS y Spatial lag. Los principales resultados obtenidos muestran la existencia de autocorrelacion espacial en la deuda viva entre los municipios. Las variables género del alcalde, índice de subvenciones y transferencias recibidas y el periodo medio de pago presentan efectos directos sobre la deuda viva. Mientras que, el índice de ahorro neto, la población no activa, la renta local y la fortaleza política tienen efectos directos en la deuda del municipio y efectos espaciales indirectos en la deuda de los municipios vecinos.

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