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

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  • Giovanna D'Inverno
  • Wim Moesen
  • Kristof De Witte

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.

Suggested Citation

  • Giovanna D'Inverno & Wim Moesen & Kristof De Witte, 2020. "Local government size and service level provision. Evidence from conditional non-parametric analysis," Working Papers of LEER - Leuven Economics of Education Research 657314, KU Leuven, Faculty of Economics and Business (FEB), LEER - Leuven Economics of Education Research.
    • Handle: RePEc:ete:leerwp:657314
    Note: paper number DPS 20.12
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    More about this item

    Keywords

    Efficiency analysis; Municipal mergers; Municipal expenditure; Local governments; Composite indicator;
    All these keywords.

    JEL classification:

    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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