Measuring and Analyzing the Technical Efficiency of Bulgarian Municipalities – an Application of Data Envelopment Analysis (DEA)

Abstract

Going through a series of crisis and post-crisis periods over the last twenty years has had a serious negative impact on public finances around the world, while at the same time the pressure on all levels of public sector governance to deliver more and better public services is growing. This requires a rethinking of the way public services are provided and funded, and efforts to improve performance through more efficient use of resources, and especially at local government level. On the one hand, as a result of global trends in decentralization, more and more spending responsibilities have been transferred to the local public sector and it has become a major provider of public services. On the other hand, the performance of local authorities is also one of the factors determining the decision of individuals and businesses to leave one local unit and choose another that offers better services at lower prices (lower tax burden). The present study aims to measure and evaluate the technical efficiency of Bulgarian municipalities through the application of the non-parametric method Data Envelopment Analysis (DEA). The results of the calculations of the technical efficiency of municipalities in Bulgaria show significant cost efficiency differences between local territorial units. In general, the management at the local level does not use effectively about 25% of their expenditures. The largest number of municipalities operate under increasing return of scale, and these are mostly small local territorial units.