Output complexity, environmental conditions, and the efficiency of municipalities

Abstract

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...

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