Economies of scope in Portuguese local government using an augmented Hicks–Moorsteen approach

ABSTRACT

Whereas a substantial empirical literature has investigated scale economies in local government, by contrast little effort has been directed at economies of scope. To address this gap in the literature, this paper empirically examines economies of scope in 308 Portuguese local governments and the extent to which it explains differential council performance. We employ a new methodology using geometric distance functions, an augmented Hicks–Moorsteen index, and partial frontiers for (in)efficiency assessment in local government. The results demonstrate that most councils that ‘externalize’ service provision face diseconomies of scope, which increase in proportion to the externalization of service provision.

KEYWORDS:

• council performance
• council size
• economies of scope
• Portuguese local government

JEL:

• C5
• C6
• H7
• R5

ACKNOWLEDGEMENTS

The authors thank to two anonymous referees who kindly, and significantly, improved this paper’s quality, clarity and structure owing to their beneficial comments. The contents of the paper are the authors’ own responsibility. The usual disclaimer applies.

DISCLOSURE STATEMENT

No potential conflict of interest was reported by the authors.

ORCID

Diogo Ferreira http://orcid.org/0000-0001-5418-9337

Brian Dollery http://orcid.org/0000-0003-2760-865X

Rui Marques http://orcid.org/0000-0003-0344-5200

Additional information

Funding

This work was supported financially by the Portuguese Foundation for Science and Technology (FCT) [grant number SFRH/BD/113038/2015].