Efficiency levels of sub-national governments: a comparison of SFA and DEA estimations

Primož Pevcin (University of Ljubljana, Ljubljana, Slovenia)

The TQM Journal

ISSN: 1754-2731

Publication date: 8 April 2014

Abstract

Purpose

By utilizing the two most commonly used approaches to generate “best practice frontier” to estimate efficiency of observed units, the purpose of this research paper is to estimate technical efficiency for total population of 200 Slovenian municipalities for the 2011 fiscal year.

Design/methodology/approach

Stochastic frontier analysis (SFA) and data envelopment analysis (DEA) methods are used to estimate technical efficiency levels. Namely, the majority of studies have utilized these two “traditional” approaches. Since the advantages of one method often represent the disadvantages of the other method, the two methods have been selected to compare the results obtained on the technical efficiency levels.

Findings

The results suggest that mean technical inefficiency should be approximately 22-25 percent (SFA method), whereas DEA method suggests the inefficiency in the range 12-18 percent. The DEA approach also suggests that the paper has many more technically efficient units compared to the SFA estimates. Nevertheless, the SFA assessment has revealed that, although on average the inefficiency should be larger compared to the DEA assessment, more than one-third of municipalities should exhibit relatively low levels of inefficiency (less than 5 percent).

Originality/value

This study utilizes both parametric as well as non-parametric approaches to assess the technical efficiency, which is not very common in the empirical literature. Besides, it focusses on the local government efficiency in a post-socialist country.

Keywords

Citation

Pevcin, P. (2014), "Efficiency levels of sub-national governments: a comparison of SFA and DEA estimations", The TQM Journal, Vol. 26 No. 3, pp. 275-283. https://doi.org/10.1108/TQM-12-2013-0127

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Publisher

:

Emerald Group Publishing Limited

Copyright © 2014, Emerald Group Publishing Limited

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