engleski

A non-parametric approach to local government efficiency measurement: Some common perceptions reviewed in the case of Istria county

Croatia’s political and fiscal decentralization process has not been completed, causing some local government units to lag in economic development. As an already scientifically proven consequence, the disparities among cities and municipalities and between cities and municipalities are pronounced and continue to deepen. This imposes a growing need for comparative efficiency measurement of local government units. Building upon earlier research, this paper empirically investigates such efficiency from the fiscal angle to question two common perceptions emphatically. The first one predicts greater efficiency of cities than municipalities, while the second one assumes greater efficiency of coastal compared to non-coastal local government units. Accordingly, two hypotheses were formulated to determine the validity of these perceptions on the example of Istria County. The results obtained based on five fiscal indicators for 2007-2020, using the window data envelopment analysis (DEA) method, unexpectedly refute the first hypothesis. At the same time and as expected, the second hypothesis is supported. Thus, the perception that cities have a better performance than municipalities is dismissed, while the perception that non-coastal local government units underperform the coastal ones is confirmed. The third hypothesis that, based on two previous types of research, points to the number of local government employees as the most significant source of inefficiency, is also examined on the data of Istria County. Although the testing of this hypothesis showed the compensation of local government employees (instead of their number) to be the most significant source of inefficiency, this additionally confirmed the previously identified problem of local government employees. All these elucidating results can serve as an assistance tool for local policymakers to diminish or eliminate the identified problems.

(in)efficiency, fiscal indicators, local government units in Istria, data envelopment analysis, window analysis

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