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A Stochastic Frontier Approach to Measuring Inefficiency of Local Communities in Bosnia and Herzegovina

Author

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  • Lazović-Pita Lejla

    (PhD, Associate Professor, School of Economics and Business, University of Sarajevo, BiH, Address: Trg oslobodjenja-Alija Izetbegovic 1, Sarajevo)

  • Šćeta Lamija

    (PhD, Associate Professor, School of Economics and Business, University of Sarajevo, BiH)

Abstract

The significance and methods of measuring inefficiency of local communities has been gaining prominence in the last decade. The purpose of this paper is to empirically investigate the level of technical inefficiency in the sample of local communities in Bosnia and Herzegovina (BiH) for the year of 2017. We implement parametric stochastic frontier analysis (SFA) to conduct an input-oriented stochastic parametric approach to measuring technical inefficiency of local communities in BiH. The results of our work are complementary to previous research indicating relative technical inefficiency of local communities in BiH. On average, BiH local communities’ total expenditures can be reduced by 46.8 percent without reducing output levels to achieve the result of the local community on the best practice frontier. Since our analysis and selection of variables are driven by data availability, the future research plans to include more variables.

Suggested Citation

  • Lazović-Pita Lejla & Šćeta Lamija, 2021. "A Stochastic Frontier Approach to Measuring Inefficiency of Local Communities in Bosnia and Herzegovina," South East European Journal of Economics and Business, Sciendo, vol. 16(1), pages 18-29, June.
    • Handle: RePEc:vrs:seejeb:v:16:y:2021:i:1:p:18-29:n:7
    DOI: 10.2478/jeb-2021-0002
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    More about this item

    Keywords

    local communities; technical inefficiency; stochastic frontier analysis; Bosnia and Herzegovina;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

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