Local government size and service level provision. Evidence from conditional non-parametric analysis

Giovanna D'Inverno, Wim Moesen and Kristof De Witte

No 657314, Working Papers of LEER - Leuven Economics of Education Research from KU Leuven, Faculty of Economics and Business (FEB), LEER - Leuven Economics of Education Research

Abstract: Although the local provision of public goods accommodates better to the heterogeneous local preferences and mitigates the fiscal illusion problem, it comes at the cost of potential diseconomies of scale. This paper examines the relationship between municipal size and local service level provision by applying state-of-the-art non-parametric techniques to a unique panel dataset of Flemish data. We measure the service provision level by using an innovative robust conditional ‘Benefit of the Doubt’ model and we estimate its efficiency in relationship with the local expenditures by means of a robust conditional Data Envelopment Analysis model. Overall, the main findings suggest the presence of diseconomies of scale, and provide weak evidence on an optimal size of local public good provision of around 10,000 citizens.

Keywords: Efficiency analysis; Municipal mergers; Municipal expenditure; Local governments; Composite indicator (search for similar items in EconPapers)
Pages: 35
Date: 2020
New Economics Papers: this item is included in nep-eff, nep-sbm and nep-ure
Note: paper number DPS 20.12
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Published in FEB Research Report Department of Economics

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Journal Article: Local government size and service level provision. Evidence from conditional non-parametric analysis (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:ete:leerwp:657314

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