Overcoming Cost-Inefficiencies within Small Municipalities: Improve Financial Condition or Reduce the Quality of Public Services?

José Luis Zafra-Gómez, Manuel Antonio and Pérez Muñiz
Additional contact information
José Luis Zafra-Gómez: Departamento de Economía Financiera y Contabilidad, Universidad de Granada, Campus de Cartuja s/n, 18071 Granada, Spain

Environment and Planning C, 2010, vol. 28, issue 4, 609-629

Abstract: A common finding of studies evaluating cost-efficiency in the provision of local public services is the existence of economies of scale in the production of such services. How can smaller, less efficient local authorities overcome this position of disadvantage? According to economic theory, they should either obtain supplementary funding or otherwise reduce the quality levels of the services provided. The aim of the present study is to evaluate the relations among different dimensions of municipal performance. The above concepts are analysed in a sample composed of 923 local authorities in Spain, each with fewer than 20 000 in habitants, using a data envelopment analysis model adapted for the particular characteristics of the local environment and repeating the analysis for two different periods, 2000 and 2005, in order to increase the consistency of the results obtained. Empirical analysis shows that the financial management and the productive efficiency of small local authorities are not interrelated, with the more cost-efficient bodies (especially for quality-related costs) being the least efficient as regards their financial condition. Moreover, our analysis of cost-efficiency for the smaller municipalities shows that revenues must be increased in order to obtain a similar level of quality to that of larger authorities.

Date: 2010
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://epc.sagepub.com/content/28/4/609.abstract (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sae:envirc:v:28:y:2010:i:4:p:609-629

Access Statistics for this article

More articles in Environment and Planning C
Bibliographic data for series maintained by SAGE Publications ().