Estimating local government efficiency using a panel data parametric approach: the case of Chilean municipalities

Francisca Pacheco, Rafael Sanchez and Mauricio Villena

Applied Economics, 2021, vol. 53, issue 3, 292-314

Abstract: Previous empirical evidence on municipal efficiency mostly uses cross-sectional data which makes it impossible to separate unobserved heterogeneity from inefficiency. Furthermore, they also typically use a two-stage approach which has been widely criticized as the assumptions in the first stage are violated in the second stage, generating biased results. We contribute to the literature by putting forward a one stage approach with parametric models and panel data to estimate municipal efficiency of 324 Chilean municipalities for the period 2008–2018. We take into account observed and unobserved heterogeneity, incorporating them both into the frontier and jointly estimating efficiency of all the municipalities in the sample. Our results suggest that Chilean municipalities have a relevant degree of inefficiency as they could achieve the same provision of services with 53% −61% less resources, depending on the specification, and that there is large heterogeneity in their level of efficiency. Finally, we also find that municipalities with a high dependency on the Municipal Common Fund are less efficient supporting the notion of local governments fiscal laziness present in the literature …

Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2020.1808171 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Estimating Local Government Efficiency using a Panel Data Parametric Approach: The Case of Chilean Municipalities (2020)
Working Paper: Estimating Local Government Efficiency using a Panel Data Parametric Approach: The Case of Chilean Municipalities (2020)
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:taf:applec:v:53:y:2021:i:3:p:292-314

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2020.1808171

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().