ABSTRACT
We study the effect of a Portuguese structural reform, which reduced the number of parishes, on municipality spending efficiency between 2011 and 2016. We build a composite output indicator and use Data Envelopment Analysis (DEA) to compute efficiency scores. Then, we use a second-stage regression to evaluate the effect of the reform on municipal efficiency after controlling for socio-demographic, political and economic factors. Overall, we find efficiency gains in approximately 10% of municipalities. In some regions (e.g., Alentejo and Centro), more than 50% of the municipalities improved efficiency. The second-stage results show that the structural reform did not improve local spending efficiency in Mainland Portugal, particularly in the Centro, Lisbon and Vale do Tejo regions.
Disclosure statement
No potential conflict of interest was reported by the authors.
Supplementary material
Supplemental data for this article can be accessed here.
Notes
1. A structural reform is defined as changes to the boundaries, numbers, and types of local authorities in a given local government system (Garcea and LeSage Citation2005).
2. The proliferation of municipal mergers or amalgamations has occurred in several countries, including Australia (Dollery, Kortt, and Grant Citation2012; Mughan Citation2019), Canada (Cobban Citation2017), Denmark (Vrangbæk Citation2010; Blom-Hansen, Houlberg, and Serritzlew Citation2014; Welling Hansen, Houlberg, and Pedersen Citation2014), Finland (Moisio and Uusitalo Citation2013), Germany (Blesse and Baskaran Citation2016), Israel (Reingewertz Citation2012), Netherlands (Allers and Geertsema Citation2016) and Swedeen (Hanes Citation2015). However, demergers have also occurred, for instance, in Canada (Sancton Citation2011).
3. To compute technical efficiency, we can use parametric methodologies such as corrected ordinary leastsquares and stochastic frontier analysis (SFA) or non-parametric techniques such as data envelopment analysis (DEA) and free disposal hull (FDH). For instance, Chan, Ramly, and Karim (Citation2017) use stochastic analysis, and Adam, Delis, and Kammas (Citation2011) use panel GMM.
4. For example, Eeckhaut, Tulkens, and Jamar (Citation1993), De Borger et al. (Citation1994) and De Borger and Kerstens (Citation1996) assess local municipality efficiency for Belgium; Athanassopoulos and Triantis (Citation1998) and Doumpos and Cohen (Citation2014) for Greece; Prieto and Zofio (Citation2001), Balaguer-Coll, Prior-Jimenez, and Vela-Bargues (Citation2002) and Benito, Bastida, and Garcia (Citation2010) for Spain; and Sampaio de Sousa and Stosic (Citation2005) for Brazil. For Portugal, we highlight the studies of Afonso and Fernandes (Citation2006, Citation2008), Cruz and Marques (Citation2014) and Afonso and Venâncio (Citation2016).
6. Some essential services are provided by the central government or private sector, whereas electricity, natural gas, postal services, broadband, and telecommunications are provided by private companies.
7. See Law 159/99 and Law 2/2007.
8. There were two transferences of parishes between municipalities. Pombalinho parish moved from Santarém municipality to Golegã municipality. Parque das Nações parish was created, including parts of the Loures municipality and the Lisbon municipality.
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Funding
This work was supported by the Fundação para a Ciência e a Tecnologia (Portuguese Foundation for Science and Technology), grant number UID/ECO/00436/2019 and UID/SOC/04521/2019. The views expressed are those of the authors and do not necessarily reflect those of any branch or agency of their employees.
Notes on contributors
António Afonso
António Afonso is a full professor at ISEG, Universidade de Lisboa, Portugal, and President of REM-Research in Economics and Mathematics. His research interests include macroeconomics, fiscal policy, sovereign debt, and government efficiency issues.
Ana Venâncio
Ana Venâncio is an assistant professor at ISEG, Universidade de Lisboa, Portugal and a researcher at Advance/CSG. Her research interests include the effects of public reforms, local government and entrepreneurship.
https://orcid.org/0000-0002-6926-2653
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