Spatial regimes in heterogeneous territories: The efficiency of local public spending

Francesco Vidoli, Agnese Sacchi and Edgar J. Sanchez Carrera

Economic Modelling, 2025, vol. 151, issue C

Abstract: We study the impact of spatial heterogeneity on cost efficiency in Italian municipalities, introducing an original method to identify functionally homogeneous territorial areas that differ from existing administrative boundaries. Our method incorporates territorial and geographical dimensions, including latent variables associated with spatial heterogeneity—relevant factors yet often overlooked in previous empirical studies. Using spatial data on road and territory planning services, we identify clusters of municipalities with shared characteristics and measure their relative efficiency within these clusters. Our findings reveal marked territorial disparities in cost efficiency, challenging conventional one-against-all benchmarking methods. Unlike standard approaches that compare each municipality with all others, our method offers a more accurate basis for evaluating municipal performance and informing policy decisions on services to citizens. This contributes to a more effective and equitable allocation of public resources, addressing practical and methodological limitations in the existing literature.

Keywords: Spatial regimes; Quantile regression; Unobserved heterogeneity; Urban traffic services; Local public spending (search for similar items in EconPapers)
JEL-codes: C21 H72 O18 R12 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:151:y:2025:i:c:s0264999325001348

DOI: 10.1016/j.econmod.2025.107139

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