Local Government Efficiency in German Municipalities

Benny Geys; Friedrich Heinemann; Alexander Kalb

doi:10.1007/s13147-012-0191-x

Authors

Benny Geys Norwegian Business School, Nydalsveien 37, 0442, Oslo, Norway
Friedrich Heinemann “Corporate Taxation and Public Finance” Research Unit, Zentrum für Europäische Wirtschaftsforschung, L 7, 1, 68161, Mannheim, Germany
Alexander Kalb “Corporate Taxation and Public Finance” Research Unit, Zentrum für Europäische Wirtschaftsforschung, L 7, 1, 68161, Mannheim, Germany

DOI:

https://doi.org/10.1007/s13147-012-0191-x

Keywords:

Local government performance, Stochastic frontier analysis, German municipalities

Abstract

This article evaluates German local governments’ cost efficiency using a sample of 1,021 municipalities in the state of Baden-Württemberg for the year 2001. We thereby concentrate on overall or ‘global’ efficiency scores—rather than estimate efficiency for one particular service—and explicitly account for exogenous or non-discretionary influences. The latter not only corrects for influences possibly beyond the control of local policy-makers, but also allows some indication of the determinants of such ‘global’ efficiency. Our results indicate that there is a substantial divergence in efficiency across municipalities despite a homogeneous institutional setting. As especially smaller municipalities appear less efficient, these results support a case for policy programmes aimed at boundary reviews or more extensive inter-communal cooperation among small municipalities.

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