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

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.

Local government efficiency: reviewing determinants and setting new trends

“…Performance (third in the ranking and often 2.97%) is a term quite used in this type of literature to refer to the results of local government actions or interventions from a more generic perspective and not necessarily in terms of efficiency. In this regard, performance can also be assessed in terms of effectiveness (D'Inverno et al., 2020) or productivity (Fried et al., 2008), for example, and not only in terms of efficiency in the area of public resource allocation (Rueda‐López et al., 2020). Precisely, in the work of Balaguer‐Coll et al.…”

Does size matter? Evidence from municipal splits

“…In addition, as discussed by Blesse and Baskaran (2016), the relationship between expenditures and size might be U‐shaped, with an initial increase in service provision efficiency as the political unit grows, and decreasing efficiency as the unit eventually becomes too large, ultimately reaching a point of diseconomies of scale (e.g., D'Inverno et al, 2022; Byrnes & Dollery, 2002; Turley et al, 2018). Moreover, size not only in terms of population size, but also in terms of territorial size and population density, is likely to have an impact on the potential for cost‐efficiency.…”

The determinants of population satisfaction from local authorities' activities: Evidence from Armenia

“…Many efficiency evaluation techniques are used in local government research, but all the results are almost identical. There are several nonparametric (Asatryan & De Witte, 2015; D'Inverno et al, 2020; Rabar & Grbin, 2021) and parametric (Asmare & Begashaw, 2018; Pacheco et al, 2014) studies evaluating management efficiency, in which different components of local government efficiency assessment are applied: educational, service delivery, tax, health factors (Pacheco et al, 2014), the relationship between the size of local governments and the efficiency of service delivery (D'Inverno et al, 2020), and the connection between communities and municipalities (Rabar & Grbin, 2021). In the national literature, there are also valuable publications on the assessment of population satisfaction, which include factors such as age, gender, education, public awareness, public participation (Altunyan, 2021), satisfaction with the work of local government bodies, regions, attitude toward local government bodies («Asparez» Club of Journalists Public Organization, 2016; AMCOA, CFOA, ISDTC, UCOA, Urban SDF, ICHD., 2012; Caucasus Research Resource Center – Armenia Foundation, 2016), awareness about taxes, and independence of local government bodies (Karapetyan et al, 2019).…”