Efficiency assessment of Portuguese municipalities using a conditional nonparametric approach

Abstract

Measuring local government efficiency is a complex task that has to take into account that they usually operate in a heterogeneous context. Therefore, the estimation of relative efficiency measures of their performance needs to account for the effect of contextual and exogenous variables on the production process. This should assure that the respective measures adequately reflect the portion of inefficiency that may be attributable to local authorities. In this paper, we apply time-dependent conditional frontier estimators to assess the performance of the 278 Portuguese mainland municipalities for the 2009-2014 period. By applying this nonparametric approach, we can avoid the strong assumptions on the specification of the estimated production function required by traditional two-stage methods. Furthermore, we examine the effect of contextual and exogenous variables on municipal efficiency levels and technological change. The results reveal that the recent local reforms introduced after the bailout agreement have slightly enhanced the performance of local authorities, but only for small and medium-sized municipalities.

Turnout, political strength, and cost efficiency in Spanish municipalities of the autonomous region of Galicia: Evidence from an alternative stochastic frontier approach

“…Units are characterized as efficient if they have produced as much as possible with the inputs they have actually employed, or if they have produced that output at minimum cost (Greene, ). To assess the degree of economic efficiency in the provision of specific public goods and services or the overall efficiency of governments in other regions, both deterministic (Afonso & Fernandes, ; Balaguer‐Coll & Prior, ; Benito et al, , ; Cordero, Díaz, & Polo, ; Cordero, Pedraja‐Chaparro, Pisaflores, & Polo, ; De Borger et al, ; Loikkanen & Susiluoto, ; Sampaio De Sousa & Stosic, ) and stochastic (Geys et al, ; Geys & Moesen, ; Kalb et al, ; Pacheco et al, ; Stastná & Gregor, ; Tanaka, ) methods have been employed.…”

Achieving Sustainable Development Goals. Efficiency in the Spanish Clean Water and Sanitation Sector

“…This circumstance seems to concern mainly the tourist areas. However, in this regard, [37] pointed out how the high economic efficiency of coastal municipalities with high numbers of tourists connected to the higher tax revenues and the higher rate of development. However, in relation to the efficiency of water services, the results of empirical studies are conflicting.…”

Local governments' efficiency: a systematic literature review—part I

“…Finally, Asatryan and De Witte () used the conditional efficiency model (Daraio and Simar, ) while Cordero et al. () used the time‐dependent conditional frontier model recently developed by Mastromarco and Simar (). They are an extension to the traditional FDH and order‐m, which allow to account for heterogeneity among municipalities.…”

“…Similarly, Afonso and Fernandes (), Da Cruz and Marques (), and Cordero et al. () investigated cost efficiency in 278 Portuguese local governments for data from 2001 to 2014. In general, the efficiency results shown in Portuguese municipalities are quite low, scoring from 0.22 to 0.76.…”