Abstract
Traditional economic analyses of the public sector that assume cost minimization are not consistent with political models of bureaucracy. If costs are not minimized then estimated cost functions will be biased. The purpose of this paper is to provide a flexible nonparametric technique based on Farrell-type efficiency measures to estimate public sector costs. Standard indices need to be modified to fit the special nature of public sector service provision which is characterized by an influence of exogenous variables on cost. A useful by-product is an index of environmental harshness faced by local governments. For illustrative purposes, this technique is applied to a sample of New York State school districts. It is found that nearly 64% of districts are cost inefficient, spending on average $1200 per pupil above the cost minimizing level. In addition, it is estimated that the average school district faces environmental cost of over $1700 per pupil.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
