An Empirical Analysis of Municipal Performance in Australian Local Government

Abstract

<p>The performance of local councils in all Australian local government systems has been an ongoing concern of state and territory policymakers. In recent decades, a variety of reform programs intended to improve performance have been carried out with limited success by various state and territory governments. The primary goal of this thesis is to estimate the effects of municipal environments and municipal characteristics on municipal performance. We seek to understand various dimensions of municipal performance, what affects these dimensions and how they are related.</p> <p>The thesis is presented in an article format and comprises six related papers. In the first four papers, a variety of econometric methods, primarily multiple regression and efficiency analysis, are applied to empirically investigate the impact of (a) structural reform, (b) economies of scale, (c) economies of scope and (d) spatial remoteness on both efficiency and sustainability. We make use of data sets released by the Australian Bureau of Statistics and various state and territory government bodies in addition to financial data published by individual local councils. Efficiency is measured variously through per-capita council expenditure and through technical efficiency scores produced using efficiency analysis techniques, whereas we measure municipal sustainability through the use of key performance indicators. The final two papers focus entirely on econometric methods. In these papers, new tools are developed to address technical problems encountered while carrying out the research presented in the empirical chapters, specifically missing data and limited dependent variables.</p> <p>The results obtained in this thesis have useful public policy implications, especially how best to address differences in council size and council type. We find that the evidence for economies of scale is ambiguous and that while certain aspects of councils certainly benefit from scale economies – specifically, evidence was found of a large optimal scale for administration – it cannot be taken for granted that an increase in council size will necessarily improve council performance. Evidence of widespread economies of scope was found. In general, it is vital for public policymakers to take into account individual council characteristics in order for reform policies to be successful.</p>