An empirical analysis of the impact of administrative intensity on the operational efficiency of the Victoria state local government system in Australia

Abstract

<p>While a voluminous empirical literature has investigated municipal efficiency, much less attention has focused on the impact of administrative intensity on municipal performance. In this paper we seek to contribute to the empirical literature by examining the relationship between operational efficiency and administrative intensity in the Victorian local government system over the period 2014/15 to 2018/19 using a second stage bootstrapping Data Envelopment Analysis fractional regression model. We find that administrative intensity negatively affects the performance of local councils for the bias-corrected efficiency model. Moreover, administrative intensity exhibits a U-shaped relationship with municipal efficiency. We also find that administrative intensity has a differential impact on the efficiency of rural councils in contrast to urban councils. Various public policy implications are considered.</p>