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Cost efficiency in Australian local government: A comparative analysis of mathematical programming and econometric approaches

Worthington, Andrew C. (2000) Cost efficiency in Australian local government: A comparative analysis of mathematical programming and econometric approaches. Financial Accountability and Management, 16(3), pp. 201-224.

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Abstract

A sample of one hundred and seventy-seven New South Wales’ local governments is used to compare the data envelopment analysis (DEA) and stochastic frontier approaches to cost efficiency measurement. The results suggest that the choice of reference technology implies different levels of efficiency and rankings for identical samples and thereby has a dramatic influence on the policy implications drawn from frontier cost efficiency measures. Notwithstanding these comments, DEA and stochastic frontiers should be thought of as complementary tools in the analysis of local public sector efficiency. In the first instance, the frontier adheres closely to the notion of best-practice efficiency, whereas in the second it refers to an absolute measure of efficiency. Clear advantages thereby accrue to DEA in identifying benchmark local governments and peer groups for comparison, while the stochastic frontier permits the opportunity for direct comparison with other institutional milieus.

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ID Code: 2650
Item Type: Journal Article
Keywords: Technical, allocative and cost efficiency, data envelopment analysis, local government
DOI: 10.1111/1468-0408.00105
ISSN: 0267-4424
Subjects: Australian and New Zealand Standard Research Classification > ECONOMICS (140000) > APPLIED ECONOMICS (140200) > Public Economics- Taxation and Revenue (140215)
Australian and New Zealand Standard Research Classification > STUDIES IN HUMAN SOCIETY (160000) > POLITICAL SCIENCE (160600) > Australian Government and Politics (160601)
Australian and New Zealand Standard Research Classification > STUDIES IN HUMAN SOCIETY (160000) > POLICY AND ADMINISTRATION (160500) > Public Administration (160509)
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Copyright Owner: Copyright 2000 Blackwell Publishing
Copyright Statement: The definitive version is available at www.blackwell-synergy.com
Deposited On: 24 Nov 2005
Last Modified: 05 Jan 2011 23:25

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