Efficiency Analysis of Local Government Spending of Regencies and Cities in West Java

Estro Dariatno Sihaloho

Estro Dariatno Sihaloho Padjadjaran University, Bandung

Keywords: local government expenditure, efficiency, DEA, TOBIT

Abstract

This paper has two objectives. The first is to estimate technical efficiency scores for local government expenditure in regencies and cities in West Java. The second is to analyze the other environmental factors that play an important role in the technical efficiency scores of local government expenditure in the same regencies and cities. This research uses a data envelopment analysis (DEA) method to estimate technical efficiency scores and uses a Tobit method for analyzing environmental factors. The DEA method uses capital expenditure per capita, employment of government expenditure per capita, and goods and services expenditure per capita as input and uses gross regional product (GRP) per capita, human capital index (HDI) and road infrastructure length per wide area as output. The Tobit method uses the total of investment credit funds, total labor and total government employment per 1000 civil servants. The results showed that there are many region that have high spending but can not achieved the maximum score of efficiency. The Tobit estimation shows that the total of investment credit funding and total labor have positive and significant marginal effects in creating optimal technical efficiency scores. Total government employment per 1000 civil servants has a negative and insignificant marginal effect on optimal technical efficiency scores.

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