Measuring Efficiency at the Regional Level: A Data Envelopment Analysis Approach

  • Suncana Slijepcevic Institute of Economics, Zagreb
Keywords: efficiency, performance, Data Envelopment Analysis, regional level

Abstract

European countries have been continuously under the pressure to improve public balances and efficiency of public spending. Economic crisis which started during 2007 weakened public finances at the state and local level in countries all over the world. In Croatia local government budgets are still below the pre-crisis level in many local government units. This paper empirically examines efficiency of public expenditures at the regional level. Performance has been investigated by developing a composite indicator of output. Spending efficiency at the regional level was analysed using Data Envelopment Analysis methodology. Results suggest that there are large differences at the regional level in using resources to provide public services. The results show that the local government units in the least efficient county should on average decrease their expenses by 55 percent, while achieving the same performance to become efficient.

References

Afonso, A. & St.Aubyn, M. (2005) Cross-country efficiency of secondary education provision: A semi-parametric analysis with nondiscretionary inputs, Working paper series, European central Bank, No. 494 (Frankfurt am Main: European Central Bank).

Afonso, A. & Fernandes, S. (2006) Measuring Local Government Spending Efficiency: Evidence for the Lisbon Region,. Regional Studies, 40, pp.39-53. doi:10.1080/00343400500449937.

Benito, B., Bastida, F. & García, J. A. (2010) Explaining differences in efficiency: an application to Spanish municipalities, Applied Economics, 42(4), pp. 515-528, https://doi.org/ 10.1080/00036840701675560.

Blaeschke F. & Haug, P. (2018) Does intermunicipal cooperation increase efficiency? A conditional metafrontier approach for the Hessian wastewater sector, Local Government Studies, 44(1), pp. 151-171, https://doi.org/10.1080/03003930.2017.1395741.

Charnes, A., Cooper, W. W. & Rhodes, E. (1978) Measuring the efficiency of decision making units, European Journal of Operational Research, 2, pp. 429-444.

Cooper, W.W., Seiford, L. M. & Tone, K. (2007) Data Envelopment Analysis: A comprehensive text with models, applications, references and DEA-solver software (New York: Springer).

Croatian Bureau of Statistics (2011) Census 2011 available at: https://www.dzs.hr/Hrv_Eng/publication/2012/SI-468.pdf (December 14, 2018).

De Borger, B. & Kerstens, K. (1996) Cost efficiency of Belgian local governments: a comparative analysis of FDH, DEA, and econometric approaches, Regional Science and Urban Economics, 26, pp. 145–70, https://doi.org/10.1016/0166-0462(95)02127-2.

De Borger, B., Kerstens, K., Moesen, W. & Vannaste, J. (1994) Explaining differences in productive efficiency: an application to Belgian municipalities, Public Choice, 80, pp. 339–58, https://doi.org/10.1007/BF01053225.

Farrell, M. J. (1957) The measurement of productive efficiency, Journal of the Royal Statistical Society, 120(3), pp. 253-290.

Geys, B. & Moesen, W. (2009) Measuring local government technical (in)efficiency an application and comparison of FDH, DEA, and econometric approaches, Public Performance & Management Review, 32, 499–513, https://doi.org/10.2753/PMR1530-9576320401.

Guidoum, Y. & Soto, P. (2010) Cities and the economic crisis – A survey on the impact of the economic crisis and the responses of URBACT II cities (Paris: EU URBACT).

Gupta, S. & Verhoeven, M. (2001) The efficiency of government expenditure experiences from Africa, Journal of Policy Modeling, 23, pp.433-467.

International Monetary Fund (1998) Financial Crises, Causes and Indicators, May, World Bank Outlook (Washongton D.C.: The World Bank).

Jonas, J. (2012) Great Recession and Fiscal Squeeze at U.S. Subnational Government Level, IMF Working Paper WP/12/184 (Washington D.C.: IMF).

Jurlina Alibegović, D., Slijepčević, S. & Kordej-De Villa, Ž. (2013) Can Local Governments in Croatia Cope with more Responsibilities, Lex Localis - Journal of Local Self-Government, 1(3), pp. 471-497.

Kalb, A., Geys, B. & Heinemann, F. (2011) Value for money? German local government efficiency in a comparative perspective, Applied Economics, 44(2), pp. 201-218, https://doi.org/ 10.1080/00036846.2010.502110.

Kocisova, K., Hass-Symotiuk, M. & Kludacz-Alessandri, M. (2018) Use of the DEA method to verify the performance based model for hospitals, Business Administration and Management, 21(4), pp. 125-140, https://doi.org/10.15240/tul/001/2018-4-009.

Kutlar, A., Bakirci, F. & Yüksel, F. (2012) An analysis on the economic effectiveness of municipalities in Turkey, African Journal of Marketing Management, 4(3), pp. 80-98, https://doi.org/10.5897/AJMM11.054.

Lo Storto, C. (2013) Evaluating technical efficiency of Italian major municipalities: a Data Envelopment Analysis model, Procedia – Social and Behavioral Sciences, 81, pp. 346-350.

Levine, H., Justice, J. B. & Scorsone, E. A. (2013) Handbook of Local Government Fiscal Health (Burlington: Jones & Bartlett Learning).

Linna, M., H¨akkinen, U. & Magnussen, J. (2006) Comparing hospital cost efficiency between Norway and Finland, Health Policy, 77, pp.268–278.

Loikkanen, H. & Susiluoto, I. (2005) Cost efficiency of Finnish municipalities in basic service provision 1994–2002, Urban Public Economics Review, 4, pp. 39–63.

Ministry of Finance (2018) Local and regional budgets for the 2014-2017 period, database, available at: http://www.mfin.hr/hr/ostvarenje-proracuna-jlprs-za-period-2014-2017 (December 8, 2018).

Narbón-Perpiňa, I. & De Witte, K. (2018) Local governments˙ efficiency: a systematic literature review – part I, International Transactions in Operational Research, 25, pp.431-468, https://doi.org/ 10.1111/itor.12364.

OECD (2009) Coping with the crisis at local level: policy lessons from the OECD Programme on Local Economic and Employment Development (LEED), internal working document, CFE (Paris: OECD).

Pevcin, P. (2014) Efficiency levels of sub-national governments: a comparison of SFA and DEA estimations, The TQM Journal, 26(3), pp. 275-283, https://doi.org/10.1108/TQM-12-2013-0127.

Pilyavsky, A. & Staat, M. (2008) Efficiency and productivity change in Ukrainian health care, Journal of Productivity Analysis, 29, pp. 143–54. https://doi.org/10.1007/s11123-007-0070-6.

Slijepčević, S. (2018) The impact of the economic crisis and obstacles to investments at local level, Transylvanian Review of Administrative Sciences, 55E, pp. 62-79 doi:10.24193/tras.55E.5.

Štástná L. & Gregor, M. (2015) Public sector efficiency in transition and beyond: evidence from Czech local governments, Applied Economics, 47(7), pp.680-699, https://doi.org/ 10.1080/00036846.2014.978077.

Vidoli F. & Fusco, E. (2018) Level of services, spatial dependence and allocative efficiency in local governments, Local Government Studies, 44(6), pp. 848-873, https://doi.org/ 10.1080/03003930.2018.1512491.

Published
2019-07-25
Section
Articles