Assessing the Efficiency of Local Government in Malaysia

Ekonomi Islam Indonesia

The purpose of this study was to analyze the efficiency of local government expenditure based on Islamic Human Development Index (I-HDI) in Local Government at the Indonesian’s Province using Data Envelopment Analysis (DEA). DEA is a non parametic method that was developed to measure the level of efficiency compared to the Decision Making Unit (DMU). This method can measure the efficiency of a government entity by using multi-input and multi-output. DEA result also can be used to identify wich input or output must be increased by Decision Making Unit (DMU) to reach optimum efficiency. The result from this study showed that the average of efficiency score in local government at Indonesian’s Province is increasing from 2015 until 2018. This study also indicates that North Sumatera, East Java, and Yogyakarta’s government spending were efficient in 4 years. While Bangka Belitung and West Papua achieve the lowest efficiency score, and should optimize input and increase the number of outp...

Proceedings of the 4th International Conference on Economics, Business and Economic Education Science, ICE-BEES 2021, 27-28 July 2021, Semarang, Indonesia, 2022

This study aims to analyze the efficiency level of local government spending in generating local revenue and investment in the region. Capital expenditure which consists of capital expenditure and operating expenditure as input variable and income and regional investment as output variable. Data Envelopment Analysis is used as a method for measuring efficiency because the tool can accommodate several input variables and several output variables. The results of the study show that the level of efficiency of capital expenditure in the districts/cities in the province of Central Java varies widely. The results also show that many areas have not yet reached the maximum level of efficiency. Based on the classification of the amount of expenditure and the level of efficiency score, districts/ cities can be grouped into four categories. The first category is the area with the amount of capital expenditure and efficiency level above average. The second category is the area with the amount of capital expenditure below the average but the level of efficiency above the average. The third category is the area with the amount of capital expenditure and the efficiency level below the average and the last category is the area with the amount of capital expenditure below the average but the level of efficiency above the average. The results of the efficiency level and categorization can be used as a reference in formulating policies related to capital expenditure and local government efficiency.

Ekonomi Islam Indonesia, 2020

The purpose of this study was to analyze the efficiency of local government expenditure based on Islamic Human Development Index (I-HDI) in Local Government at the Indonesian's Province using Data Envelopment Analysis (DEA). DEA is a non parametic method that was developed to measure the level of efficiency compared to the Decision Making Unit (DMU). This method can measure the efficiency of a government entity by using multi-input and multi-output. DEA result also can be used to identify wich input or output must be increased by Decision Making Unit (DMU) to reach optimum efficiency. The result from this study showed that the average of efficiency score in local government at Indonesian's Province is increasing from 2015 until 2018. This study also indicates that North Sumatera, East Java, and Yogyakarta's government spending were efficient in 4 years. While Bangka Belitung and West Papua achieve the lowest efficiency score, and should optimize input and increase the number of output to improve the efficiency. Morever, the main source of inefficiency is in Life birth rate indicators.

Public Performance & Management Review, 2009

Economic efficiency -understood in terms of jurisdictions providing a maximum amount of output for a given level of inputs -is one potential means to evaluate public policies. Various approaches, however, co-exist to measure the (technical) efficiency of organizations. Given that these rely on different underlying assumptions, it is important to assess whether, and to what extent, the approach taken affects the outcome of efficiency studies. The present paper employs a dataset of local governments in Flanders in 2000 to compare the three common approaches to measure (in)efficiency (i.c. FDH, DEA and econometric techniques). Our results indicate that the methodological choices of instrumentation have a substantial effect on analytic performance measurement. Hence, assessing the robustness of the results across various approaches to efficiency measurement is crucial to avoid incorrect inferences.

2017

By analyzing state governments' efficiency in allocating fiscal resources, this study evalu-ates the efficiency of state public finances under the Malaysian fiscal federalism. This is reflected in the policies, strategies and decisions made to allocate public expenditure as this measurement would enable us to explain the institutional quality of the public sector in re-spect of the concept of regional competitiveness. In particular, states play important role in supporting the private sector and the market-based economy. The Data Envelopment Analy-sis (DEA) under the dynamic condition and Tobit panel data regression model are conducted on data for all the thirteen stat es in Malaysia from 1990 to 2009. The results of DEA reveal evidence that the current centralized fiscal federalism system has been unable to create a competitive environment among state governments, resulting in low levels of efficiency in the states. As an extension of the DEA, Tobit panel data regression model ...

Dokuz Eylül Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 2017

In this study, relative efficiencies of Regional Development Agencies (RDA) work in Turkey were determined using Data Envelopment Analysis (DEA). The goal of DEA is to measure relative efficiencies of comparable Decision Making Units which produce similar input and output. At the end of the analysis, reference decision making units will be determined for inefficient decision making units. To do this data are gathered from efficiency reports of Regional Development Agencies and based on these data, efficiency scores are calculated. At the end of the study, recommendations are given with the help of findings to improve RDAs performances.

SSRN Electronic Journal, 2000

In this paper we measure the relative efficiency of Portuguese local municipalities in a non-parametric framework approach using Data Envelopment Analysis. As an output measure we compute a composite local government output indicator of municipal performance. This allows assessing the extent of municipal spending that seems to be "wasted" relative to the "best-practice" frontier. Our results suggest that most municipalities could achieve, on average, the same level of output using fewer resources, improving performance without necessarily increasing municipal spending. Inefficiency scores are afterwards explained by means of a Tobit analysis with a set of relevant explanatory variables playing the role of non-discretionary inputs. JEL: C14, C34, H72, R50

Journal of Economic Surveys, 2019

This paper reviews the literature on local government efficiency by metareviewing 360 observations retrieved from 54 papers published from 1993 to 2016. The meta-regression is based on a random effect model estimated with the 2-step Random Effects Maximum Likelihood (REML) technique proposed by Gallet and Doucouliagos (2014). Results indicate that the study design matters when estimating a frontier in local government. We find that studies focusing on technical efficiency provide higher efficiency scores than works evaluating cost efficiency. The same applies when using panel data instead of cross-section data. Interestingly, studies that use the Free Disposal Hull (FDH) approach yield, on average, higher efficiency scores than papers employing the Data Envelopment Analysis (DEA) method, thereby suggesting that in this literature the convexity hypothesis of the production set is a matter. Finally, the efficiency of local government increases with the level of development of the analysed countries and is positively related to the national integrity of the legal system. The opposite holds when considering the corruption.

2017

One learns two main lessons from the efficiency literature on local governments. The first lesson regards the heterogeneity in the efficiency scores reported in primary papers. The second lesson is that there is no quantitative evidence on the role played by the features of each paper (i.e. estimation method, sample size, dimension, returns to scale) in explaining the differences in results. In order to fill this gap, we review the related empirical literature and perform a Meta Regression Analysis (MRA) by examining 360 efficiency scores retrieved from 54 papers published from 1993 to 2016. The metaregression is based on a random effect model estimated with the Random Effects Maximum Likelihood (REML) technique, because it controls for within-and between-study heterogeneity. We also run a fixed effect unrestricted Weighted Least Squares (WLS) regression. Due to its main research focus, that is measuring the impact of potential sources of heterogeneity on local government efficiency, the paper contributes to the debate in two ways. One of this concerns the role of methodological choices made by researchers when performing an efficiency study. The second regards the role of deregulation in local government, which is a policy-issue in a number of countries. Results show that efficiency scores are highly heterogeneous. To be precise, significant differences in means are found when grouping efficiency by different criteria. The meta-regression estimates indicate that studies focusing on technical efficiency provide higher efficiency scores than works evaluating cost efficiency. Using panel data in primary studies allows researchers to obtain higher efficiency of local government than papers using cross-section data. Interestingly, FDH studies yield, on average, higher efficiency scores than DEA papers, thereby suggesting that in this literature the convexity hypothesis of the production set is a matter. Furthermore, we find that primary papers evaluating the efficiency of European municipalities provide lower efficiency scores than studies focusing on other countries (USA, Africa, Asia and Latina America). We also provide evidence that the estimated efficiency scores in primary papers focusing on the municipalities of a region are, one average, lower than those retrieved from studies addressing the efficiency of the national system of local government.

Documents de Treball ( Universitat Autònoma de Barcelona. Departament d'Economia de l'Empresa ), 2002

This study analyses efficiency levels in Spanish local governments and their determining factors through the application of DEA (Data Envelopment Analysis) methodology. It aims to find out to what extent inefficiency arises from external factors beyond the control of the entity, or on the other hand, how much it is due to inadequate management of productive resources. The results show that on the whole, there is still a wide margin within which managers could increase local government efficiency levels, although it is revealed that a great deal of inefficiency is due to exogenous factors. It is specifically found that the size of the entity, per capita tax revenue, the per capita grants or the amount of commercial activity are some of the factors determining local government inefficiency.