ASSESSING AGGREGATE COST EFFICIENCY AND THE RELATED POLICY IMPLICATIONS FOR GREEK LOCAL MUNICIPALITIES

The assessment of local government performance is a major issue for a number of industrial countries since local municipalities are assuming increasingly more responsibility in terms of providing essential serv ices to their taxpayers. In fact, the decentralisation of decision-mak ing from central governments to local municipalities has made the meas urement and evaluation of their performance critical. In this paper, a two stage methodology is proposed as a comprehensive approach to meas ure the performance of local municipalities. During the first stage, e fficiency performance is measured using mathematical programming and e conometric frontier approaches. A second stage is proposed where the i mpact of policy making factors on the efficiency measures obtained fro m the first stage is evaluated. The policy implications of cost effici ency are investigated by grouping local municipalities within clusters of similar performance characteristics and also by identifying the de terminants of their cost efficiency using censored regression models. The approach is implemented by studying the performance of Greek local municipalities.