Estimating Local Government Efficiency using a Panel Data Parametric Approach: The Case of Chilean Municipalities

Francisca Pacheco, Rafael Sanchez and Mauricio Villena

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Efficiency; Local governments; Panel Data; Parametric Estimation; Chile. (search for similar items in EconPapers)
JEL-codes: D2 D24 H71 H72 H83 O54 (search for similar items in EconPapers)
Date: 2017-07-01, Revised 2020-01-27
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/102267/8/MPRA_paper_102267.pdf original version (application/pdf)

Related works:
Journal Article: Estimating local government efficiency using a panel data parametric approach: the case of Chilean municipalities (2021)
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:pra:mprapa:102267

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().