Council type and the determinants of municipal expenditure: A semiparametric analysis of South Australian local government

Abstract

Despite the ongoing failure of ‘one-size-fits-all’ policies in the realm of local government policymaking worldwide, such as municipal mergers, public policymakers across Australian local government, including South Australia (SA), remain committed to uniform policy prescriptions that do not take into account the characteristics of different categories of local authorities. Furthermore, although a substantial body of empirical work exists on municipal expenditure, the vast bulk of research effort has been directed at (a) determining whether council size by population systematically affects average costs and (b) ascertaining whether scale economies exist in specific categories of municipal service provision, especially in waste collection and water services. However, this empirical literature has largely ignored the question of whether the characteristics of specific categories of municipality systematically affect outlays, especially non‐discretionary environmental factors. This paper seeks to address this gap in the literature by examining empirically how council type influences the determinants of municipal expenditure in SA. We find that there is a significant difference in per household expenditures between the different categories of SA local authorities in terms of the various types of municipal outlays. Moreover, environmental factors have a differential impact on the various kinds of per household expenditures of each category of local councils.