Local governments’ efficiency: study of its determinants

Abstract

Public administration efficiency is increasing on the agenda, considering the scarcity of public resources and the greater demand of citizens for their needs to be met. This research aims to study the determinants of the financial efficiency of the Portuguese municipalities. For this, the determinants were grouped into three categories: sociodemographic, political and budgetary. There seems to be evidence, considering the results, that political determinants do not influence the financial efficiency of municipalities. Regarding the sociodemographic determinants, it is observed that the financial efficiency of the municipalities is influenced by location, purchasing power index, tourism and the unemployment rate. Tax revenue and financial independence are budgetary determinants that positively influence the financial efficiency of municipalities. Staff expenditure have a negative effect on it.