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Local government efficiency: is there anything new after Troika’s intervention in Portugal?
Abstract
The austerity policies implemented in Portugal because of the bailout agreement between the Portuguese Government and the Troika include measures to increase performance and reduce costs. An analysis of local government efficiency and an assessment of its determinants is highly relevant for policy purposes, particularly when new efforts to decentralize are being discussed. The aim of this research is to evaluate the efficiency of the 278 mainland municipalities in Portugal using a two-stage procedure, combining data envelopment analysis in the first phase with fractional response models in the second. The analysis is performed for 2010 and 2015, before and after the Troika’s intervention in Portugal. Results show a similar pattern for both years, in the two stages. The results also indicate that there is no structural changes from 2010 to 2015, suggesting that the reforms implemented in municipalities did not succeed.
... As noted by Gendźwiłł et al., the outcomes of amalgamation are hard to determine due to specific "institutional contexts, territorial organization prior to the reform, strength of local identities, and political agency of the reforms' proponents and opponents, as important moderating variables" (Gendźwiłł et al., 2020). (2015) bailout agreement reforms which required fiscal consolidation and structural reforms (i.e., reducing the number of local government administrations) Basilio et al. find no significance difference pre and post reforms (Basílio et al., 2020). These reforms were focussed on cost control and budgetary issues-i.e., value for money. ...
... These reforms were focussed on cost control and budgetary issues-i.e., value for money. While it would appear that they are not particularly effective in that regard, the study does indicate that factors such as the education level of the region, the degree of fiscal autonomy and the share of state transfers over current expenses had a positive impact on efficiency (Basílio et al., 2020). Timing is critical in understanding the impacts of these reforms. ...
Enhancing productivity is a common rationale for devolution, outsourcing and new institutional configurations and a recurring theme in public administration reforms. Functions such as urban planning, infrastructure development, water management, and transportation planning have clear spatial characteristics wherein their governance ideally spans their functional use and/or management. These considerations have led to municipal amalgamations and two-tier governance in an effort to consolidate functions and build economies of scale and to the creation of special purpose, intermediate or regional bodies to manage public investments and deliver specialised services. While there is a growing urban literature on governance at the right scale in certain policy areas, far fewer studies explore these factors in lower density places (towns and rural and remote areas). Moreover, how effective and efficient governance might boost productivity both within the institution and more generally, across the local/regional economy is underexplored. This paper takes stock of how governance at the right scale might improve public sector productivity in different types of places-urban, rural and remote. It draws on theoretical, empirical and policy literature to explore how scale matters to public sector productivity and governance.
... Further, like other studies, there were several areas for which the size of government was found to be not important: e.g., eldercare, schools, daycare, and caring for children with special needs. In a similar study design evaluating the efficiency of 278 mainland municipalities in Portugal prior (2010) and post (2015) bailout agreement reforms which required fiscal consolidation and structural reforms (i.e., reducing the number of local government administrations) Basilio et al. find no significant difference pre and post reforms (Basílio, Pires, Borralho, & dos Reis, 2020). These reforms were focussed on cost control and budgetary issues-i.e., value for money. ...
... These reforms were focussed on cost control and budgetary issues-i.e., value for money. While it would appear that they were not particularly effective in that regard on the whole, the study does indicate that factors such as the education level of the region, the degree of fiscal autonomy and the share of state transfers over current expenses had a positive impact on efficiency (Basílio et al., 2020). Timing is critical in understanding the impacts of these reforms. ...
‘Place matters’ has become a mantra among diverse researchers and scholarship on local and interregional dynamics, political institutions and actors and has ballooned in recent years. Public sector governance entails the institutions by which public goods and services are delivered and how collective goals are determined and accomplished. Enhancing productivity is a common rationale for devolution, outsourcing and new institutional configurations and a recurring theme in public administration reforms. This paper takes stock of how governance at the right scale can improve public sector (and private sector) productivity in different types of places—urban, rural and remote. It draws on theoretical, empirical and policy literature to explore: (1) How scale matters to public sector productivity and governance; (2) How governance at the right scale can be enhanced (e.g., getting the incentives right); (3) The barriers to productivity improvements in all types of regions and (4) Future opportunities and challenges, including those related to the Covid-19 pandemic.
... They use the performance appraisal criteria system as the basis for weighing the importance of each performance task; factors that can influence local government decisions on performance task implementation include differences in task incentive intensity, task relevance, and result perceptibility (Zhang & Jiao, 2010). Basílio et al. (2020) analyzed the efficiency of local governments and its determinants. These determinants were found relevant when new efforts to decentralize were introduced. ...
In many countries, including China, traditional one-dimensional performance appraisal has led local governments to spend more on economic construction and less on human capital and public services. In 2013, China decided to abandon the traditional bias of performance appraisal. This study aims to analyze the effect of multidimensional performance appraisal on the local government expenditure structure in China. The study collected panel data from 31 provincial administrative regions in China during 2007–2018 for empirical analysis. By assigning different weights to economic-based performance appraisal pressure, livelihood-based performance appraisal pressure, and ecological-based performance appraisal pressure, the study observed the effects of performance appraisal criteria on local government expenditure structure. The results show that: local governments place more emphasis on tasks with higher relative incentive intensity and allocate more expenditures to them; the correlation between tasks affects the proportion of expenditures on related tasks; the basic principle of local government officials in balancing the expenditure structure is to maximize their own utility. They give priority to spending on tasks with high marginal revenue. In addition, this paper also discusses the causes and mechanisms of distortion in local government spending structure. Finally, the paper puts forward corresponding policy recommendations, which provide new ideas for multidimensional performance assessment of local governments.
... de entendimento sobre as condicionalidades de política económica" (Banco de Portugal, 2011) foi assinado em 17 de maio de 2011, altura em que foi acordado o PAEF, também designado como "Programa de ajustamento económico" (European Commission, 2011), que foi publicado em junho de 2011. 4Basílio et al. (2019) fornecem uma descrição das medidas contidas no memorando de entendimento com repercussão nos governos locais. Os autores analisaram as alterações estruturais ocorridas entre 2010 e 2015, antes e depois da intervenção da Troika, e concluíram que as reformas implementadas não produziram efeitos ao nível da eficiência da administração local. ...
A recente crise económica global renovou o interesse no debate sobre a causalidade entre receitas e despesas públicas devido aos graves desequilíbrios orçamentais experimentados por muitos países, sobretudo na área do euro, e às crescentes preocupações com a sustentabilidade das finanças públicas. Este artigo analisa a relação dinâmica entre as receitas e as despesas locais para 278 municípios portugueses, no período 2009-2017. Os resultados da aplicação de testes de raiz unitária e de cointegração e da estimação de modelos com vetor corretor de erros para dados em painel permitem concluir que as duas variáveis orçamentais locais, receitas próprias e despesas totais, se ajustam para alcançar um saldo orçamental local nulo no longo prazo. Assim, os resultados suportam a hipótese de sincronização orçamental que estabelece que as decisões relativas às receitas e despesas são tomadas em simultâneo pelas autoridades orçamentais, o que contribui positivamente para a respetiva sustentabilidade das contas públicas dos municípios.
... This difference in the local government size was also evident in recent studies. Although it did not measure the determinants of efficiency, but rather focused on the changes in efficiency and effectiveness after integrating an intervention, the study of Basílio, Pires, Borralho, and dos Reis [78] on Portuguese municipalities revealed that larger municipalities recorded better performance than their smaller counterparts. In summary, the results of the hypothesis testing from the three panel regression models are summarized on Table 5. ...
This study sought to identify the drivers of local government efficiency by investigating three key motivations: internal capacity, rewards for good performance, and compliance with the national government. This paper studied the business registration efficiency cases of 141 highly urbanized and component cities in the Philippines using the cities and municipalities competitiveness index dataset from 2017 to 2019. It was found that capacity-related factors are the most influential in motivating Philippine cities to be more efficient in their business registration processes. Having a higher institutional capacity, higher public service experiences, and good technology infrastructure contribute immensely to better service delivery. Compliance with the national government's directions on public service standards also positively influences efficiency. In addition, it was confirmed that these factors may appear differently, depending on cities' size statuses. Other policy implications and recommendations for future research are discussed.
... Planning, for example, defines the commitments between the institution itself and other stakeholders, as the decision-making processes performed by the political actor in the allocation of financial resources become a prerequisite for regulating relations between an administration and its citizens and the transparency mechanisms that support political consensus. The construction of transparency in these contexts reflects a different way of interpreting the rules of good performance and the impartiality of an administration and makes it possible for organizational behavior to ensure efficiency, effectiveness, and economy of operations (Basílio et al. 2019). The presence of politicians and managers and their complex mode of interaction (Frederickson and Smith 2003;Svara 2001) often makes the process of internalization of goals and the roles involved in managing local administration non-homogeneous. ...
Public administrations are introducing managerial innovations, accounting and control systems into their organizations to enhance economic, financial, and organizational performance. Transparent communication is an important vehicle to increase the accountability of public administrations toward the community, contributing to a lasting development of the degree of credibility and trust toward the institutional system. Transparency generates the basis for social control, consensus building, and networks between public organizations and stakeholders, but also requires greater openness to the external context. This study investigates transparency processes in public governments, highlighting their complexity and the effects on the activities of open governments. To analyze the managerial approach to transparency, we have adopted Meijer’s model (Public Administration Review, 73, 429–439, 2013). The model studies transparency in public organizations from a strategic, cognitive, and institutional perspective and the way in which it is developed through the interaction between governments and stakeholders. The results show how power games, cognitive frames, and institutional rules influence the creation of government transparency. They highlight the importance of analyzing their interrelation in order to gain a better understanding of the complex dynamics of transparency in open public organizations.
Purpose
This paper aims to propose a tool to assess local public expenditure effectiveness based on a framework of alignment between outputs, outcomes and impacts – the Index of Municipal Expenditure Effectiveness (IMEE). This index is composed of a set of indicators associated with the typology of local expenditure.
Design/methodology/approach
The paper describes the methodological approach used in the development of the Index, considering the insights from the literature review and the opinion of a panel of experts. The indicators of outcomes and social impacts that are part of the Index are intentionally aligned with the UN Sustainable Development Goals (SDGs) as they provide an essential guide to assess public value creation in the current context. For simplicity purposes, three main components of municipal expenditure were considered, namely Education, Essential Public Services and Local Public Transportation. The Index is then illustrated through a pilot application, using data from five Portuguese municipalities.
Findings
This study argues that measuring the public expenditure effectiveness based on outcome and impact indicators can provide the data needed for local governments to better understand the effects of their activities over time, ultimately assessing their contribution to public value.
Practical implications
Assessing the impact of local spending is important to ensure the best use of public resources. Linking local public expenditures with the 2030 Agenda and the SDGs is a promising avenue to understand up to what extent the application of the public money is contributing to create public value by impacting on citizens’ lives.
Originality/value
The proposed IMEE contributes to addressing a gap identified in public organizations, including local governments, regarding the lack of consideration of expenditure and outcome/impact relationships, and the use of variables to measure long term impacts.
This paper discusses the territorial reform in Portuguese parishes in 2013 following the bailout from the International Monetary Fund, the European Central Bank and the European Commission (Troika). The purpose of this paper is (i) to frame the reform of the parishes in Portugal in the trends of reorganization at the local level in European countries in recent decades; (ii) to situate the aggregation at the national scale, integrating it in the Reform of Local Administration of the XIX Government (2011-2015); (iii) to analyze, from the Algarve, the changes in the exercise of its powers, in the provision of services to the population and in the relationship with the municipality; (iv) to discuss the results achieved. The methodology is based on the literature review on local territorial reforms in European countries, on the critical reading of the national process, and the empirical approach is based on the perspective of the elected representatives, based on semi-structured interviews with all the mayors of the aggregated parish councils in the Algarve. The top-down aggregation process applied in the country triggered in the region a reaction of sharing and collaboration between parishes, reducing tensions and fractures between communities (but, in other situations, exposing old divisions or fractures). The new map is assimilated, but criticism remains and two reversals have already occurred.
Sosyal belediyecilik kavramının ortaya çıkışı ile birlikte belediyelerin yetki ve yükümlülükleri artmaktadır. Günümüzde, belediyeler genişletilmiş bütçelere ile nicelik olarak çok fazla sayıda hizmet vermektedirler. Vatandaşlar şeffaf, etkin ve verimli kamu hizmeti talep etmektedirler. Kamu kurumları kaynakları önemsemekte iken kaynakların asıl sağlayıcısı olan vergi ödeyenlerin de beklentileri aynı derecede önemsenmelidir. Bu bağlamda, Türkiye’nin nüfus olarak en büyük beş büyükşehir belediyesinin finansal etkinlikleri gri ilişkisel analiz yöntemi ile araştırılmıştır. Büyükşehir belediyelerinin çoğunluğunda yıllar bazındaki finansal etkinlik eğiliminin pozitif olduğu görülmektedir. Bulgulara göre, Ankara büyükşehir belediyesi finansal performansa bağlı etkinlik puanlamasında en başarılı konumdadır.
The local government (LG) sector plays an important role in the EU economies. Besides providing a vast range of public services, it accounts for over 8% of total investment. The crisis, which started in 2008, resulted in increased LG indebtedness and raised concerns over the sector’s debt repayment capacity. This paper proposes an alternative methodology of risk assessment of LGs to statutory debt limits, the Altman model and non-financial indicators. Firstly, it employs a corporate finance approach to evaluate the financial standing of individual entities. The measures are based on free operating cash flow and net debt. Next, Data Envelopment Analysis is used to derive the relative performance of LGs in debt utilization. The indicators used are available from the LG financial reports and also allow risk to be monitored on a quarterly basis. The proposed approach allows the ranking of the risk of individual LGs according to both their debt service capacity and long-term ability to manage costs and carry out a rational investment policy. The results obtained using the DEA method also enable the identification of LGs with persistently inferior risk profile. The quantitative analysis is conducted for the local governments in Poland for the period 2008–2015.
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. 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 variables and time on the shape of the frontier and the distribution of inefficiencies. The results reveal that the local reforms do not seem to have achieved the pursued objective of improving the efficiency of local government performance. However, we can observe a small improvement in the last year of the period after the amalgamation of some civil parishes, thus it seems that this specific process might have had a certain impact in the short term. Moreover, we find that the economic and demographic indicators included as contextual variables in our model play an important role as influencing the production set, although those effects do not seem to vary much over time. This evidence is corroborated after conducting a second-stage nonparametric regression of the conditional efficiency measures over those variables.
The efficient management of the available resources in local governments has been a topic of high interest in the field of public sector. We provide an extensive and comprehensive review of the existing literature on local governments' efficiency from a global point of view, covering all articles from 1990 to August 2016. This paper is the second of two. It covers the aspects related to local governments' efficiency measurement along with its determinants, that is, taking into account the effect of environmental variables over efficiency. First, we describe which techniques have been used to incorporate environmental variables in the context of local governments. Second, we provide a classification for the determinants used and summarize their impact on efficiency. Finally, we discuss some operative directions and considerations for further research in the field.
The efficient management of the available resources in local governments has been a topic of high interest in the field of public sector. We provide an extensive and comprehensive review of the existing literature on local governments' efficiency from a global point of view, covering all articles from 1990 to August 2016. This paper is the first of two. It covers the basic aspects related to local governments' efficiency measurement not taking into account the effect of environmental conditions. First, we show a detailed overview of the studies investigating public sector efficiency across various countries, comparing the data and samples employed, and the main results obtained. Second, we describe which techniques have been used for measuring efficiency in the context of local governments. Third, we summarize the inputs and outputs used. Finally, we discuss some operative directions and considerations for further research in the field.
Institutions and institutional structures play an important role in the theory and research of processes involved in economic progress. The competitive position of territorial units depends on their effective performance, especially on the efficiency of local governments. Skills, qualifications and functional abilities of local authorities gain importance. In this context, creating and stimulating the economic growth locally is essential, because it equates with building the foundation of development processes in all areas of life. Our purpose was to evaluate the institutional efficiency of local authorities manifested by administrative decisions they take. The data submitted to our analysis consisted of appeals against decisions taken by local governments. The objective was to analyze the appeals filed to local government appeal boards and how they were examined in compliance with the binding law. The time period spanned the years 2007 to 2013. The analysis covered appeals lodged to the Local Government Appeal Board in Olsztyn.
The main objective of this manuscript is to test two competing hypotheses from the regionalism/localism literature regarding local government size. The Leviathan hypothesis argues that fragmentation induces lower spending through more decentralised government structures which are smaller relative to the size of the local economy. This argument is in sharp opposition with the supporters of regionalism who argue that territorial centralisation can produce economies of scale and significant cost savings, reduce overlaps and promote a more efficient local government. These competing hypotheses derived from the literature are tested using data collected from all 278 local governments of continental Portugal. We measure local government size as both per capita total expenditures and per capita grant transfers to sub-city governments and territorial fragmentation as the number of sub-city governments per 1,000 individuals. Our findings indicate that higher levels of sub-city fragmentation lead to increased municipal government spending and transfers to sub-city governments, thus suggesting that the amalgamation of sub-city governments required by the Memorandum of Understanding (MoU) signed in 2011 by the Portuguese government, the International Monetary Fund, the European Union and the European Central Bank and mandated by national legislation has the potential to induce cost savings and to improve financial sustainability.
O crescente aumento da competitividade do setor de transporte aéreo nos últimos anos tem provocado uma mudança na dinâmica de mercado, levando as companhias aéreas a buscar novas estratégias para garantir a sua posição. Este artigo tem o objetivo de analisar o desempenho das companhias aéreas brasileiras no que tange à sua gestão operacional, após a crise do setor, ocorrida em 2006. A eficiência das empresas aéreas em 2007 foi avaliada através da comparação dos resultados obtidos no modelo de Análise Envoltória de Dados (Data Envelopment Analysis - DEA) clássico com os calculados pelo método da fronteira invertida. Este artigo inclui ainda a identificação das companhias com as melhores e piores práticas gerenciais.
Costa H., Gonçalves Veiga L. and Portela M. Interactions in local governments' spending decisions: evidence from Portugal, Regional Studies. This paper aims to analyse the degree of interaction between Portuguese municipalities' expenditure levels by estimating a dynamic panel model, based on jurisdictional reaction functions. The analysis is performed for all 278 Portuguese mainland municipalities from 1986 to 2006, using alternative ways to measure neighbourhood. Results indicate that local governments' spending decisions are significantly and positively influenced by the actions of neighbouring municipalities. Attempts to identify the sources of interaction allow it to be concluded that they are due to spillovers that require coordination in expenditure items and to mimicking behaviour possibly to attract households and firms.
Arcelus F. J., Arocena P., Cabasés F. and Pascual P. On the cost-efficiency of service delivery in small municipalities, Regional Studies. This paper analyses the determinants of the efficiency of local government spending. To that effect, a stochastic cost frontier is estimated on a sample of 260 small municipalities from Navarre, a region located in northern Spain. The results suggest that the cost-efficiency in the provision of municipal services increases with (1) the level of pooling or joint provision of services among municipalities; (2) the saliency of local taxes, as compared with regional grants, in its operating budget; (3) the presence of external public comptrollers; and (4) the magnitude of the municipality's accumulated past investment in infrastructures.
Este trabalho apresenta uma modelagem para decisão de novos investimentos em tecnologia da informação, com uso da Análise Envoltória de Dados. O objetivo é comparar as diferentes opções de investimentos, constituindo um modelo que poderá ser utilizado para analisar a viabilidade de projetos, os riscos envolvidos e, quantificar os benefícios reais dos investimentos a serem realizados. Os índices de eficiência gerados pelo modelo permitirão que os agentes com poder de decisão dentro das empresas escolham a opção de investimento mais eficiente entre as opções disponíveis. Os inputs do modelo são os riscos e custos de desenvolvimento e os outputs os benefícios esperados.
This paper studies the role of direct democracy in ensuring efficient and cost-effective provision of goods and services in the public sector. The sample consists of the population of municipalities in the German State of Bavaria, where in the mid-1990s considerable direct democratic reforms granted citizens wide opportunities to directly participate in local affairs through binding initiatives. Using information on the municipal resources and the municipal provision of public goods, and applying a fully non-parametric approach to estimate local government overall efficiency, the analysis shows that more direct democratic activity is associated with higher government efficiency. This result suggests that more inclusive governance through direct decision-making mechanisms may induce more accountable and less inefficient governments.
In this paper we have two main goals. From a theoretical point of view we intend to develop an improvement to the DEA variable selection models. It is in the variable normalisation step that this improvement takes place. From a practical point of view we intend to measure an energetic efficiency of the 27 Brazilian estates. A state achieves this efficiency when it has high values of some socio-economic indexes and low level of energy consumption. We used the non-parametrical approach of Data Envelopment Analysis (CCR and BCC models). We also used the inverted frontier DEA model.
The present paper explores sources of technical (in)efficiency of Flemish municipalities in their production of local public goods (in the year 2000). in assessing inefficiency derivation, we focus on socio-economic and political characteristics of the municipalities as potential source. Our main findings indicate that while the socio-economic make-up of the population (i.c. income, income inequality, education and unemployment) appears to bear little relation to local (in)efficiency, the reverse holds for the municipal financial situation (i.c. grants, historical debt and fiscal surplus) as well as population size and density. Also, different types of communities – i.e. agricultural, residential, industrial, touristic or urbanized – are generally found to achieve comparable performance levels in providing ‘core’ public services. While indicative, the limitations of our dataset imply that further work is vital before definitive conclusions (as well as causal inferences) can be made.
Economic efficiency—understood in terms of jurisdictions providing a maximum amount of output for a given level of inputs—is one potential means to evaluate public policies. Various approaches, however, co-exist to measure the (technical) efficiency of organizations. Given that these rely on different underlying assumptions, it is important to assess whether, and to what extent, the approach taken affects the outcome of efficiency studies. This paper employs a data set of local governments in Flanders in 2000 to compare the three common approaches to measure (in)efficiency (i.e., free disposal hull, data envelopment analysis, and econometric techniques). Our results indicate that the methodological choices of instrumentation have a substantial effect on analytic performance measurement. Hence, assessing the robustness of the results across various approaches to efficiency measurement is crucial to avoid incorrect inferences.
In this paper adjusted input-specific scores of technical efficiency are computed for a sample of Spanish water utilities. Performance is adjusted by netting out efficiency scores from the effect of operating environments and statistical noise. The results show that computation of adjusted efficiency scores at the input level manifestly improves the assessment of utilities’ performance in our sample of water utilities. In addition, several environmental variables capable of affecting input-specific technical management are discovered, ownership or demand seasonality among them. Finally, distributions of conventional and adjusted scores of technical performance are found to be statistically different for some inputs.
This paper examines the wide-spread practice where data envelopment analysis (DEA) efficiency estimates are regressed on some
environmental variables in a second-stage analysis. In the literature, only two statistical models have been proposed in which
second-stage regressions are well-defined and meaningful. In the model considered by Simar and Wilson (J Prod Anal 13:49–78,
2007), truncated regression provides consistent estimation in the second stage, where as in the model proposed by Banker and Natarajan
(Oper Res 56: 48–58, 2008a), ordinary least squares (OLS) provides consistent estimation. This paper examines, compares, and contrasts the very different
assumptions underlying these two models, and makes clear that second-stage OLS estimation is consistent only under very peculiar
and unusual assumptions on the data-generating process that limit its applicability. In addition, we show that in either case,
bootstrap methods provide the only feasible means for inference in the second stage. We also comment on ad hoc specifications
of second-stage regression equations that ignore the part of the data-generating process that yields data used to obtain the
initial DEA estimates.
KeywordsTechnical efficiency–Two-stage estimation–Bootstrap–Data envelopment analysis (DEA)
Data envelopment analysis (DEA) is commonly used to measure the relative efficiency of decision-making units. Often, in a second stage, a regression model is estimated to relate DEA efficiency scores to exogenous factors. In this paper, we argue that the traditional linear or tobit approaches to second-stage DEA analysis do not constitute a reasonable data-generating process for DEA scores. Under the assumption that DEA scores can be treated as descriptive measures of the relative performance of units in the sample, we show that using fractional regression models are the most natural way of modeling bounded, proportional response variables such as DEA scores. We also propose generalizations of these models and, given that DEA scores take frequently the value of unity, examine the use of two-part models in this framework. Several tests suitable for assessing the specification of each alternative model are also discussed.
AFONSO A. and FERNANDES S. (2006) Measuring local government spending efficiency: evidence for the Lisbon region, Regional Studies 40, 39–53. The expenditure efficiency of Portuguese local governments in 2001 was assessed using Data Envelopment Analysis for production frontier estimation. A composite municipal output indicator was constructed and input and output efficiency scores were computed for 51 Portuguese municipalities in the region of Lisbon and Vale do Tejo. This allows a determination of the extent of municipal spending that seems to be ‘wasted’ relative to the theoretical ‘best-practice’ frontier. The results suggest that Vale do Tejo municipalities could achieve, on average, the same level of output allegedly using around one-third fewer resources, improving performance without necessarily increasing municipal spending.
The present article tests predictions of rational political business cycle models using a large and previously unexplored data set of Portuguese municipalities. This data allows for a clean test of these predictions due to the high level of detail on expenditure items, an exogenous fixed election schedule, and homogeneity of Portuguese local governments with respect to policy instruments and institutions. Estimation results clearly reveal the opportunistic behaviour of local governments. In pre-electoral periods, they increase total expenditures and change their composition favouring items that are highly visible to the electorate. This behaviour is consistent with an effort to signal competence and increase chances of re-election.
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. Este trabajo analiza la eficiencia de las corporaciones locales de la ComunidadValenciana y sus factores determinantes. El análisis se lleva a cabo en dos etapas. Enprimer lugar, la eficiencia es medida a través de técnicas (no paramétricas) de análisisde la actividad. El empleo de este tipo de técnicas permite también identificar lasfuentes de ineficiencia, esto es, si esta es básicamente en costes, técnica o de carácterasignativo. La segunda etapa identifica algunos determinantes clave de la eficiencia,centrándose tanto en variables políticas, así como de política fiscal. Frente a estudiosprevios en dos etapas, nuestro enfoque lleva a cabo este último objetivo a través detécnicas no paramétricas de suavizado, en lugar de métodos econométricos (tales comoMCO o modelos Tobit). Los resultados indican que las ineficiencias son atribuibles engran parte a factores asignativos, dando lugar a un margen considerable entreeficiencia en costes y eficiencia técnica. La ineficiencia también es mayor para lascorporaciones locales más pequeñas. Sin embargo, no es atribuible exclusivamente auna gestión deficiente, pues el análisis de segunda etapa muestra que tanto lasvariables políticas como las de política fiscal, independientemente de si están o no bajoel control de las corporaciones locales, se hayan relacionadas con su nivel de eficiencia.
The objective of this study is to analyse the technical or productive efficiency of the refuse collection services in 75 municipalities located in the Spanish region of Catalonia. The analysis has been carried out using various techniques. Firstly we have calculated a deterministic parametric frontier, then a stochastic parametric frontier, and finally, various non-parametric approaches (DEA and FDH). Concerning the results, these naturally differ according to the technique used to approach the frontier. Nevertheless, they have an appearance of solidity, at least with regard to the ordinal concordance among the indices of efficiency obtained by the different approaches, as is demonstrated by the statistical tests used. Finally, we have attempted to search for any relation existing between efficiency and the method (public or private) of managing the services. No significant relation was found between the type of management and efficiency indices.
The present article tests predictions of rational political business cycle models using a large and previously unexplored data set of Portuguese municipalities. This data allows for a clean test of these predictions due to the high level of detail on expenditure items, an exogenous fixed election schedule, and homogeneity of Portuguese local governments with respect to policy instruments and institutions. Estimation results clearly reveal the opportunistic behaviour of local governments. In pre-electoral periods, they increase total expenditures and change their composition favouring items that are highly visible to the electorate. This behaviour is consistent with an effort to signal competence and increase chances of re-election.
The paper presents a Data Envelopment Analysis aimed at studying the efficiency of Tuscan municipalities' public expenditure. Five strategic functions of Tuscan municipalities are first considered carrying out a non-aggregate analysis; then the overall expenditure composition of each municipality and the global spending efficiency are analysed by a proposed composite indicator. The main determinants affecting the municipalities' efficiency were further investigated. In particular, the obtained results may be consistently included in the long-standing debate on the municipal size, proving that the bigger the municipality, the greater its level of public expenditure efficiency.
The efficiency of the personnel involved in local government is considered to be critical for significant progress in global competition and development. This study adopted a super-efficiency Data Envelopment Analysis (DEA) model with undesirable outputs to evaluate the operating performance of Taiwan's local governments. We also employed the concept of the Sharpe ratio to combine desirable and undesirable outputs and then, form modified outputs. The study revealed that, neglecting undesirable outputs would underestimate (on average) governments' operating efficiency and cause incorrect efficiency rankings. Moreover, given specific real disposable income per capita, undesirable outputs regarding the volume of garbage clearance and air pollution are over-produced on average; however, unemployment rates are almost optimal. We therefore propose that, environmental protection policies are crucial for local governments to increase their performance and that the evaluated efficiency scores can be used by central governments as reference indices to subsidize local governments actively engaging in environmental protection based on the difference between the average output slack and each government's output slack.
This book describes the method of data envelopment analysis that uses mathematical programming techniques to obtain measures of efficiency of individual forms from their observed input and output quantities. The method permits setting up realistic input-output targets for the firm's managers. A firm is considered to be technically inefficient when it fails to yield the maximum quantity of output producible from the input bundle it uses. Measurement of technical efficiency is important for performance evaluation and provides an objective basis for differential rewards in the context of production
The efficiency and effectiveness of local governments has become one of the main points of interest in public sector administration, as decision and policy making gradually move from the central to the local level. This paper introduces an efficiency analysis framework based on accrual accounting data obtained from the local governments’ financial statements. Data envelopment analysis is used to obtain efficiency estimates, which are analyzed through a second stage regression against a set of efficiency explanatory factors. Furthermore, the optimal reallocation of the municipalities’ inputs and outputs is explored to provide policy recommendations that a central government could implement in a budget reduction context. Detailed empirical results are presented from a panel data set of Greek municipalities over the period 2002–2009.
Managing financial resources efficiently is a requirement for all levels of government. However, measuring the performance of governments or other public authorities is usually highly complex. The results of this type of assessment are likely to be biased or perverse. This study attempts to identify non-discretionary or exogenous variables that are associated with better/worse economic performance of local governments (the determinants of efficiency). Based on past research, the paper starts by providing a classification for the different types of determinants of local government performance. Afterwards, using data from all Portuguese municipalities, the relationship between a large number of factors and the efficiency scores is assessed. To accomplish this, several Tobit, OLS and double-bootstrap models were implemented. The efficiency scores are computed through non-parametric frontier methodologies. The results indicate that analysts must be prudent while interpreting the economic results achieved by each municipality. To be impartial and robust any performance evaluation model should (at least) consider the effects of the determinants of cost efficiency identified in this paper.
The literature provides both theories and empirical assessments that link national electoral cycles and opportunistic incumbents' behaviour. However, at the subnational level the literature is scarce. Using a panel of 238 Spanish municipalities over the period 1992–2005, this paper investigates for the first time in Spain whether electoral events contribute to shape municipal debt policies. We show that the electoral cycle influences the municipal debt per capita. Furthermore, both weak (no-majority) and wealthier municipal governments have higher levels of debt per capita. Finally, our data show that the 2001 Spanish Budgetary Stability Law (stemming from the European Stability and Growth Pact) appears to have reduced the electoral effect on municipal debt per capita.
Two competing approaches for the measurement of efficiency are the stochastic frontier model and data envelopment analysis (DEA). Previous research has established that the two models applied to cross-sectional data are both adversely affected by measurement error. While the cross-sectional stochastic frontier model does not effectively handle statistical noise, panel data models do. This is true because additional information from multiple time periods is incorporated into the estimation. A panel data DEA model that uses averaged data has been shown to effectively smooth out measurement error. In this paper, we compare the panel data models using simulated data.
Spending on public services in the UK – notably health and education – has risen strongly since 2000. But assessing what this has delivered is not straightforward. This article discusses difficulties in measuring the output of public sector services and provides evidence on recent trends in the output and productivity of the health and education sectors.
Data Envelopment Analysis (DEA) evaluates the relative efficiency of decision-making units (DMUs) but does not allow for a ranking of the efficient units themselves. A modified version of DEA based upon comparison of efficient DMUs relative to a reference technology spanned by all other units is developed. The procedure provides a framework for ranking efficient units and facilitates comparison with rankings based on parametric methods.
This paper aims not only to measure the relative efficiency of government spending in seven Asian countries but also to investigate the factors that influence government performance using annual data covering the period 1986 – 2007. Four hypotheses are tested: (i) the effect of private sector activities on the inefficiency of government spending in raising GDP, (ii) the government corruption hypothesis, (iii) the government size hypothesis, and (iv) the relationship between monetary expansion and the performance of government spending. The results of data envelopment analysis (DEA) show that Japan and Singapore have the highest efficiency scores in the sample. Extreme bounds analysis (EBA) in association with Tobit regression indicates that private sector activities exhibit a robust negative relationship with government inefficiency. Corruption is found to be a crucial factor affecting government performance, and M2 expansion and the inefficiency of government spending are robustly positively related.
In recent times the relative economic efficiency of urban water utilities has been neglected as policymakers sought to secure urban water supplies. This paper is an effort to measure the efficiency consequences of a number of recent urban water policy initiatives. Data Envelopment Analysis (DEA) is employed in order to measure the relative technical efficiency of urban water utilities in regional New South Wales (NSW) and Victoria. We show that the almost universal policy of water restrictions is likely to reduce relative efficiency and the typically larger utilities located in Victoria are characterised by a higher degree of managerial efficiency. A number of implications for urban water policy are advanced.
We assess the relative efficiency of local municipalities using Data Envelopment Analysis and parametric analysis. As an output measure we compute a composite local government indicator of municipal performance, using data for Portuguese municipalities. This allows assessing the extent of possible municipal improvement relative to the “best-practice” frontier. Our results suggest that most municipalities could improve performance without necessarily increasing municipal spending. In a second stage efficiency scores are explained by means of a Tobit analysis with a set of relevant explanatory socio-economic factors playing the role of non-discretionary inputs, such as education and per capita purchasing power.
Spatial patterns in (local) government taxation and spending decisions have received a lot of attention. Still, the focus on taxation or expenditure levels in previous studies may be incomplete. Indeed, (rational) individuals are likely to consider the level of spending on (or taxation for) public goods provision simultaneously with how much public goods they actually receive—thus assessing the ‘price/quantity’ of government policies. Therefore, the present paper argues that incumbents may want their ‘price/quantity’ ratio to be close to that in neighbouring regions. Analysing Flemish local governments' efficiency ratings for the year 2000 (which relate total spending to the quantity of locally provided public goods), we confirm the existence of neighbourhood effects in local government policies.
A nonlinear (nonconvex) programming model provides a new definition of efficiency for use in evaluating activities of not-for-profit entities participating in public programs. A scalar measure of the efficiency of each participating unit is thereby provided, along with methods for objectively determining weights by reference to the observational data for the multiple outputs and multiple inputs that characterize such programs. Equivalences are established to ordinary linear programming models for effecting computations. The duals to these linear programming models provide a new way for estimating extremal relations from observational data. Connections between engineering and economic approaches to efficiency are delineated along with new interpretations and ways of using them in evaluating and controlling managerial behavior in public programs.
This article analyzes the efficiency of local governments in the Comunitat Valenciana (Spain) and their main explanatory variables. The analysis is performed in two stages. Firstly, efficiency is measured via (nonparametric) activity analysis techniques. Specifically, we consider both Data Envelopment Analysis (DEA) and Free Disposable Hull (FDH) techniques. The second stage identifies some critical determinants of efficiency, focusing on both political and fiscal policy variables. In contrast to previous two-stage research studies, our approach performs the latter attempt via nonparametric smoothing techniques, rather than econometric methods such as OLS or Tobit related techniques. Results show that efficiency scores, especially under the nonconvexity assumption (FDH), are higher for large municipalities. Thus, there is empirical evidence to suggest that resources may be better allocated by large municipalities. However, the inefficiency found is not entirely attributable to poor management, as second-stage analysis reveals both fiscal and political variables to be explicably related to municipality performance. Moreover, the explanatory variables’ impact on efficiency is robust to the chosen technique—either convex DEA or nonconvex FDH.
Social and/or political involvement within the population is often argued to enhance public sector performance. The underlying idea is that engagement fosters political awareness and interest and increases the public's monitoring ability. Still, weak fiscal autonomy can undermine voters' interest in and demand for an efficient production of public services. In our contribution, we test whether and how voter involvement in the political sphere is related to government performance – in terms of its efficiency – using a broad panel of German municipalities. Our results suggest that voter involvement indeed has a positive impact on cost efficiency. Crucially, however, this efficiency-enhancing effect of voter involvement is significantly positively affected by local governments' fiscal autonomy.
Measuring and assessing service quality in the social care sector presents distinct challenges. The 'experience' good properties of social care, for instance, and the large influence played by subjective judgements about the quality of personal relationships between carer and user and of process-related service characteristics make it difficult to develop indicators of service quality, including those of service impact on final outcomes. Using some of the key features of the 'Production of Welfare' approach, the paper discusses recent developments in the UK of the theoretical and practical frameworks used for assessing quality in social care and for understanding the final impact of services on the wellbeing of their recipients. Key current and future challenges to the development of such frameworks include difficulties in disentangling the impact of social care services on final outcomes from the often dominating effects of other, non-service related factors, and the generalization of consumer-directed care models and of the 'personalization' of care services. These challenges are discussed in the context of the different possible applications of quality indicators, including their role as supporting the service commissioning process and their use for assessing the performance of service providers.
This article, investigates efficiency in the municipal sector of the Region of Murcia (Spain). With that aim, data of 31 municipalities (69% of the response rate) have been collected. Services analysed are: police, culture, sports, green areas, refuse collection and water supply. Ratios of efficiency have been related to other control variables, such as economic level, size of the municipality, decentralization, political sign and financial situation. A weak positive relation between economic level and efficiency arises. Some weak evidence also exists that public management of refuse collection is more efficient than private. In water supply, public management by means of a company controlled by the local government is clearly more efficient than private. It also seems that the higher the tax burden, the greater the efficiency in providing services.
In many economic settings, the variable of interest is often a fraction or a proportion, being defined only on the unit interval. The bounded nature of such variables and, in some cases, the possibility of nontrivial probability mass accumulating at one or both boundaries raise some interesting estimation and inference issues. In this paper we: (i) provide a comprehensive survey of the main alternative models and estimation methods suitable to deal with fractional response variables; (ii) propose a full testing methodology to assess the validity of the assumptions required by each alternative estimator; and (iii) examine the finite sample properties of most of the estimators and tests discussed through an extensive Monte Carlo study. An application concerning corporate capital structure choices is also provided.
We develop attractive functional forms and simple quasi-likelihood estimation methods for regression models with a fractional dependent variable. Compared with log-odds type procedures, there is no difficulty in recovering the regression function for the fractional variable, and there is no need to use ad hoc transformations to handle data at the extreme values of zero and one. We also offer some new, robust specification tests by nesting the logit or probit function in a more general functional form. We apply these methods to a data set of employee participation rates in 401(k) pension plans. Copyright 1996 by John Wiley & Sons, Ltd.
The literature has identified three main approaches to account for the way exchange rate regimes are chosen: i) the optimal currency area theory; ii) the financial view, which highlights the consequences of international financial integration; and iii) the political view, which stresses the use of exchange rate anchors as credibility enhancers in politically challenged economies. Using de facto and de jure regime classifications, we test the empirical relevance of these approaches separately and jointly. We find overall empirical support for all of them, although the incidence of financial and political aspects varies substantially between industrial and non-industrial economies. Furthermore, we find that the link between de facto regimes and their underlying fundamentals has been surprisingly stable over the years, suggesting that the global trends often highlighted in the literature can be traced back to the evolution of their natural determinants, and that actual policies have been little influenced by the frequent twist and turns in the exchange rate regime debate.
A common and longstanding assumption in the economic growth literature has been that total factor productivity growth is lower in the agriculture sector than in the rest of the economy. Using a stochastic production frontier finite mixture model, labor productivity change is decomposed into catch-up, technological change and factor accumulation effects and stochastic shocks. This decomposition is investigated separately in the agriculture sector and the economy as a whole using a balanced panel data set of 45 countries in different development stages during the time period 1967-1992. The impact of labor productivity change components on the evolution of the cross-country counterfactual distribution of labor productivity is also analyzed. For the overall economy, the empirical results indicate that growth and the twin-peak distribution of labor productivity are driven by capital deepening. However, the results for the agriculture sector suggest that labor productivity distribution is brought by total factor productivity changes rather than factor accumulation. Furthermore, the agriculture sector exhibits reductions in capital per worker as well as stronger catch-up and technological change effects. Thus, growth of the rest of the economy appears to owe more to capital deepening and resource reallocation from agriculture than to faster productivity change.
Determinantes do Endividamento Municipal em Portugal
- F Ferreira
Ferreira, F. (2011). Determinantes do Endividamento Municipal em Portugal. MSc Dissertation. Braga:
Minho University.
Portugal: Memorandum of understanding on specific economic policy conditionality
- Mou
MoU. (2011). Portugal: Memorandum of understanding on specific economic policy conditionality.