Costs and Efficiency of Municipalities in Slovenia
This paper empirically analyses average costs function and technical efficiency for 200 Slovenian municipalities in the year 2011. The methodology is based on the econometric estimation of the average costs function and stochastic parametric analysis of best-practice frontier to address technical inefficiencies. The results reveal that the average costs function for Slovenian municipalities is U-shaped, and the estimated least-cost size of the municipality implies that the current number of municipalities is not optimal. Besides, the average technical efficiency of Slovenian municipalities is approximately 22-25% above estimated best-practice frontier. Following, the issues related to municipal consolidation and increased efficiency should be promoted.
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