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 stages approach which has been widely criticized as the assumptions in the first stage are violated in the second stage, generating biased results. We present a longitudinal parametric study that analyzes municipal efficiency and its determinants using a one step procedure. Moreover, we analize overall e¢ ciency as well as efficiency by clusters of municipalities in order to reduce heterogeneity. We use administrative datasets of Chilean municipalities for 2008-2010 period and our results suggest that Chilean municipalities have on average an inefficiency level of 32% with a significant variance between clusters of municipalities. Also, our results suggest that socio-economic, fiscal and political variables affect municipal efficiency. In particular, we found that municipalities with tighter budget constraints are associated with more efficient municipalities.

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)

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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)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:99150

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