Relative efficiency in spending regional governments: a contribution to the decentralization process

Abstract

This research seeks to analyze the performance of regional governments from an economic point of view. This is done by making several rankings of relative efficiency, taking into account the quality of the regions' expenditures. Six rankings were carried out according to six specific functions.

Given the heterogeneity between regions, units were split into groupings using the Ward measure, an aglomeratic hierarchy method. Once complete, this helped us produce estimates for three groups of regions.

In constructing these rankings, we used the Data Involvements Analysis (DEA) technique, a non-parametric method that computes an efficient frontier based on best practice with the distance between an observed point and the frontier being the core for computing the efficient measures. The Malmquist DEA index was used to take into account dynamic effects and disaggregated components of efficiency (for the period 2003-2005). Comparing the rankings with effectiveness measures led to no significant relationship being found. This suggests that one concept doesn't imply the other. We found that a probable relationship exists between efficiency improving and transparency in the administration and planning function.