Local governments' efficiency: a systematic literature review—part I

• DOI: http://doi.org/10.1111/itor.12364
• Author: Isabel Narbón‐Perpiñá,Kristof De Witte
• Published date: 01 March 2018
• Date: 01 March 2018

Intl. Trans. in Op. Res. 25 (2018) 431–468

DOI: 10.1111/itor.12364

INTERNATIONAL

TRANSACTIONS

IN OPERATIONAL

RESEARCH

Local governments’ efficiency: a systematic literature

review—part I

Isabel Narb´

on-Perpi˜

n´

aaand Kristof De Witteb,c

aDepartamento de Econom´

ıa, Universitat Jaume I, Avda Vicente Sos Baynat s/n, E-12071, Castell´

on de la Plana, Spain

bTop Institute for Evidence Based Education Research, Maastricht University, Kapoenstraat 2, MD 6200, Maastricht,

the Netherlands

cLeuven Economics of Education Research, Katholieke Universiteit Leuven, Naamsestraat 69, 3000 Leuven, Belgium

E-mail: narbon@uji.es [Narb´

on-Perpi˜

n´

a]; k.dewitte@maastrichtuniversity.nl, Kristof.dewitte@kuleuven.be [De Witte]

Received 10 October 2016; accepted 16 October 2016

Abstract

The efficient management of the available resources in local governments has been a topic of high interest

in the field of public sector. We provide an extensive and comprehensive review of the existing literature on

local governments’ efficiency froma global point of view, covering all articles from 1990 to August 2016. This

paper is the first of two. It covers the basic aspects related to local governments’ efficiency measurement not

taking into account the effect of environmental conditions. First, we show a detailed overview of the studies

investigatingpublic sector efficiency across various countries, comparing the data and samples employed,and

the main results obtained. Second, we describe which techniques have been used for measuring efficiency in

the context of local governments. Third, we summarize the inputs and outputs used. Finally,we discuss some

operative directions and considerations for further research in the field.

Keywords:efficiency; local government; survey

1. Introduction

Over the last 30 years, there have been many empirical studies that have focused on the evaluation

of efficiency in local governments from multiple points of view and contexts. Following De Borger

and Kerstens (1996a), it is possible to identify two strands of empirical research. On the one hand,

some studies concentrate on the evaluation of a particular local service, such as refuse collection

and street cleaning (Worthington and Dollery, 2000b, 2001; Bosch et al., 2000; Benito-L´

opez et al.,

2011, 2015), water services (Garc´

ıa-S´

anchez, 2006a), street lighting (Lorenzo and S´

anchez, 2007),

fire services (Garc´

ıa-S´

anchez, 2006b), library services (Stevens, 2005), and roadmaintenance (Kalb,

2012). On the other hand, other studies evaluate local performance from a “global point of view”

considering that local governments supply a wide variety of services and facilities.

C

2017 The Authors.

International Transactions in Operational Research published by John Wiley & Sons Ltd on behalf of International Federation

of Operational Research Societies

This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs License,which

permits use and distribution in any medium, provided the original work is properly cited, the use is non-commercial and no

modifications or adaptations are made.

432 I. Narb´

on-Perpi˜

n´

a and K. De Witte / Intl. Trans. in Op. Res. 25 (2018) 431–468

We provide a systematic review of the existing literature on local government efficiency from a

global point of view,covering all articles from 1990 up to the year 2016. This paper is the first of two.

In this paper, we focus on the basic aspects of local governments’ efficiency measurement, while in

the companion paper (Narb´

on-Perpi˜

n´

a and De Witte, 2017) we take into account the incorporation

of environmental variables in the efficiency estimation. More specifically, this paper contributes to

the literature in three major aspects. First, we present a detailed review of the studies investigating

local government efficiency across various countries, comparing the data and samples employed

as well as the main results obtained. Second, we describe which techniques have been used for

measuring efficiency in the context of local governments. Finally, we suggest classifications for the

input and output variables. In local government efficiency measurement, the selection of variables

is a complex task, due to the difficulty to collect data and measure local services (Balaguer-Coll

et al., 2013). Indeed, different studies use diverse measures, even those that analyze efficiency using

data from the same country. We identify all variables used in previous literature according to the

classifications proposed.

Our review starts from five previous works that referred to local government literature. First,

Worthington and Dollery (2000a) provided a survey of the empirical analysis on efficiency in

local government until 1999. Second, Afonso and Fernandes (2008) reviewed some relevant studies

that evaluated both nonparametric and global local governments’ efficiency. Third, Kalb et al.

(2012) collected 23 studies that analyzed local government efficiencyand made a comparison across

various countries. Fourth, Da Cruz and Marques (2014) suggested a general classification for the

determinants of local government performance.Finally, De Oliveira Junqueira(n.d.) reviewed some

empirical studies on local government efficiency and identified the main inputs and output variables

included in the analysis. However, to the best of our knowledge, the literature review presented

in these papers is the most complete source of references on local government efficiency analysis.

We show a complete overview of the existing literature, the variables’ selection, the methodologies

employed, and some considerations for further work.

The remainder of the paper is organized as follows. Section 2 provides the bibliographic selection

process to construct the systematic literature review. Section 3 presents an extensive review of

the existing literature on local governments’ efficiency at country level. Section 4 reports which

techniques have been used for measuring efficiency, while Section 5 describes the input and output

variables most commonly used. Finally, Section 6 discusses the main conclusions and suggests

operative directions for future researchers in the field.

2. A systematic review on local government efficiency

In this review, we have used the search engines Web of Science (WoS),1Scopus,2and GoogleScholar.

The search was limited to the Social Sciences CitationIndex (SSCI) in WoS and to the Social Sciences

and Humanities area in Scopus to reduce the likelihood of retrieving articles that were not related

1WoSis a scientific citation indexing database and search service maintained by Thomson Reuters. It allows for in-depth

exploration of specialized subfields within an academic or scientific discipline.

2Scopus is a bibliographic database maintained by Elsevier. It contains abstracts and citations for academic journal

articles, books, and conferenceproceedings.

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2017 The Authors.

International Transactions in Operational Research published by John Wiley & Sons Ltd on behalf of International Federation

of Operational Research Societies

I. Narb´

on-Perpi˜

n´

a and K. De Witte / Intl. Trans. in Op. Res. 25 (2018) 431–468 433

to the topic, such as energy or health efficiency. Also, we have restricted the literature search to

English language. We included empirical papers until August 2016.

As the main focus is local governments’ efficiency, the initial search was done using combinations

of the keywords “efficiency,” “performance measurement,” “local government,” and “municipal-

ity.” Using these keywords, the databasesprovided us more than 250 books, papers,and unpublished

working papers. To limit the total number of results, we excluded the presentations given at con-

ferences as well as dissertations. Next, the results retrieved were filtered qualitatively to ensure they

addressed the research question. As a criterion for inclusion, we included studies that present em-

pirical data, measuring efficiency at local government level (LAU-2),3with a selection of inputs and

outputs, and excluding studies addressed to international comparisons and studies addressed to

measure a particular service, such as refuse collection, water services, road maintenance, education,

and so on. Finally, we obtained 84 studies.

3. Country-level analysis

As mentioned in the Introduction, there have been many empirical studies that have focused on

the evaluation of the overall efficiency in local governments covering several countries. Table A1

summarizes the empirical contributions focused on local government efficiency from a global point

of view,listed by countries and chronological order of publication. As we can observe,some of these

studies also attempted to analyze the relationship between local government efficiency and other

important topics, such as the municipal size,effect of amalgamation of the municipalities, impact of

fiscal decentralization, effects of political competition, and influence of the spatialcloseness between

municipalities, among others. The differences in the average efficiency scores found between the

studies are remarkable due to differences in the samples, methodologies, and variables included.

However, we summarize efficiency scores by countries with the aim to define general trends.

Looking first at Japan, Nakazawa (2013, 2014) evaluated 479 municipalities in 2005 considering

the effects that amalgamation had over cost efficiency. Moreover, Nijkamp and Suzuki (2009)

evaluated 34 cities in Hokkaido prefecture in 2005, and Haneda et al. (2012) used 92 municipalities

in Ibaraki prefecture for the years 1979–2004 to analyze the change in efficiency in the postmerger

period. In general, Japanese municipalities show high efficiency levels, scoring from 0.75 to 0.90

depending on the method and data. Two studies have evaluated local governments in Korea.

Seol et al. (2008) analyzed 106 local governments in 2003, while Sung (2007) assessed 222 local

governments from 1999 to 2001. Both studies examined the impact of information technology

on Korean local government performance. Their results vary from 0.57 to 0.97 depending on the

specification model and the sample.

In addition, five more studies focused on other Asian countries. Yusfany (2015) analyzed 491

Indonesian municipalities in 2010, Liu et al. (2011) measured 22 local governments in Taiwan in

2007, Kutlar and Bakirci(2012) evaluated 27 Turkish municipalities from2006 to 2008, and Ibrahim

3Local administrative units (LAUs) are basic components of the Nomenclature of Territorial Units for Statistics (NUTS)

for referencing the subdivisions of countries regulatedby the European Union. Specifically, LAU-2 is a low-level admin-

istrative division of a country, ranked below a province, region, or state. So, we exclude studies focused on intermediate

level of local governments, such as those of Nold Hughes and Edwards (2000), Hauner (2008), Nieswand and Seifert

(2011), and Otsuka et al. (2014), among others.

C

2017 The Authors.

International Transactions in Operational Research published by John Wiley& Sons Ltd on behalf of International Federation

of Operational Research Societies