Local Municipality Productive Efficiency and Its Determinants in South Africa

Nara Monkam

No 201120, Working Papers from University of Pretoria, Department of Economics

Abstract: The paper assesses the technical efficiency of 231 local municipalities in South Africa for 2007 and investigates the potential determinants of efficiency gaps among local municipalities in the country using the nonparametric Data Envelopment Analysis (DEA) and the parametric Stochastic Frontier Analysis (SFA) techniques. In relation to the DEA technique, efficiency scores are subsequently explained in a second stage regression model with potential explanatory factors using a Tobit regression model. The results show that on average, B1 and B3 municipalities could have theoretically achieved the same level of basic services with about 16% and 80% fewer resources respectively; the difference between the most efficient and the least efficient municipalities being quite substantial. The results also show that B4 municipalities could have theoretically achieved the same level of basic services with about 62% fewer operating expenditures. Furthermore, fiscal autonomy and the number and skill levels of the top management of a municipality’s administration were found to influence the productive efficiency of municipalities in South Africa. The paper findings raise concerns over the future of local municipalities in South Africa, especially B3 and B4 municipalities, about their capability to efficiently deliver on expected outcomes on a sustainable basis.

Keywords: Municipalities, spending efficiency, sub-national government finance, fiscal decentralization; DEA analysis, Tobit, SFA (search for similar items in EconPapers)
JEL-codes: H11 H71 H72 H77 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2011-10
New Economics Papers: this item is included in nep-afr, nep-cis, nep-eff, nep-geo, nep-pbe and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Journal Article: Local municipality productive efficiency and its determinants in South Africa (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:201120

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