Relative Efficiency of Major Cities in Nepal

Abstract

This study aims to measure the relative efficiency of six Metropolitan and six sub-metropolitan cities of Nepal. The major cities represent by metropolitan cities and sub-metropolitan cities. Data Envelopment Analysis (DEA) method has been used to measure the efficiency from both CRS and VRS model. In addition to this scale efficiency and Malmquist Index have also been studied. Three variables i.e. recurrent/operational expenditure, Local Governance and Community Development Program (LGCDP) expenditure and capital/development expenditure have been treated as input variables and two variables i.e. Own Source Revenue (OSR) and performance measurement score have been used as output variables. The types of municipalities/cities and family size are used as contextual variables in the study. Output oriented approach has been used in the study. On an average, out of the 12 cities two have been observed to be most efficient under CRS model and 3 have been observed to be efficient under VRS during study period (2011/12 to 2015/16). On an average, over all outputs of municipalities should have been augmented by 20.08% under CRSTE and that of 11.08% under VRSTE. On an average of five fiscal years, only Pokhara metropolitan city has achieved 1.8% positive TFP growth.