Measuring Efficiency in Local Governments' Planning and Regulatory Function

Abstract

Local government in advanced economies is undergoing a period of rapid reform aimed at enhancing its efficiency and effectiveness. However, despite the importance of efficiency measurement in local government it is only relatively recently that mathematical frontier techniques have been applied to local public services. In this study, data envelopment analysis (DEA) is used to measure the technical and scale efficiency of the planning and regulatory function in 173 New South Wales’ local governments. After allowance is made for nondiscretionary environmental factors which may affect the provision of these local public services, such as the level of development activity and heritage/environmental sensitivity, comparison of efficiency across geographic/demographic criteria is made. The results suggests that, on average, planning and regulatory inputs could be reduced to 83.8 percent of the current level based upon observable best-practice whilst productivity losses due to scale effects account for 5.87 percent of total inputs. The results also indicate that inefficiency in smaller rural councils may result from the need to maintain a minimum feasible planning and regulatory department, suggesting that efficiency gains may be obtained from regional co-operation in this area.