Sub-national service provision and public spending analysis

Local and regional governments represent the nearest form ofgovernment to the people and their fundamental role in addressingcitizens’ needs is acknowledged worldwide. In linewith the subsidiarity principle, the responsibility of the publicgood and service delivery is primarily upon the territorialadministrations closer to the citizens, with the main advantageof offering more suitable and better tailored solutions atlocal level. In a context of scarce resources and tight budgetconstraints exacerbated by the ongoing economic crisis, theachievement of these goals is limited and needs to be pursuedin an efficient and effective way. Accordingly, the developmentof tools to evaluate the performance of local andregional government is required, as well as measures to monitorthe progress of the task achievement and instruments tosupport over time the decisional process, in the interest of allthe involved shareholders, specially policy makers and citizens,international and civil society organizations.This dissertation contributes to the knowledge on basic servicedelivery and public expenditure analysis at sub-nationallevel. Particularly, it deals with the provision of both generaland specific services, namely the education and water sectorones. From a methodological point of view, innovative methodsare proposed to evaluate the service supply and publicspending in terms of efficiency and effectiveness. To showthe potentiality of the suggested tools, empirical applicationsare proposed covering two EU countries, Belgium and Italy,which are interesting study cases for their common and peculiarfeatures and provide complementary insights. In Chapter 2, we propose the innovative use of a compositeindicator to measure the multidimensional aspects of thelocal public provision, encompassing several commonly acknowledgedmunicipal tasks, and to investigate the relationshipwith the local government size, as the decentralizationof public activities to the municipalities calls for a more enhancedservice provision analysis at the local level. We suggesta robust conditional version of a directional distance Benefitof-the-Doubt approach with weight restrictions based on themunicipal expenditure composition. Specifically, we deal withthe presence of undesirable municipal service indicators andwith the heterogeneity among the municipalities in their politicalpreferences, priority public activities and operating environmentcharacteristics. To illustrate the applicability of thesuggested method, we show the construction of the municipalservice provision composite indicator for 307 Flemish municipalitiesover the year 2006-2011.As a focus on a particular service, in Chapter 3 the environmentalefficiency of 96 Tuscan (Italian) wastewater treatmentplants (WWTPs) is investigated taking into account the qualityof the outgoing water in terms of pollutant. In this regard,the presence of the residual nitrogen in the outgoingtreated water is considered as undesirable output. The efficiencyanalysis is performed by applying a novel integratedAHP/non-radial directional distance function approach. Theobtained results are then used to identify the efficiency explanatoryvariables: among them, the facilities’ capacity, thepercentage of wastewater discharged by the industrial andagricultural activities and the level of compliance with thepollutant concentration threshold set by the legislator have asignificant impact on the WWTP performance.In Chapter 4, a Data Envelopment Analysis model is usedto study the efficiency of Tuscan municipalities’ public expenditure.Five strategic functions of Tuscan municipalities are first considered carrying out a non-aggregate analysis;then the overall expenditure composition of each municipalityand the global spending efficiency are analysed by a proposedcomposite indicator. The main determinants affectingthe municipalities’ efficiency are further investigated. In particular,the obtained results may be consistently included inthe long-standing debate on the municipal size, proving thatthe bigger the municipality, the greater its level of public expenditureefficiency.In Chapter 5, we explore whether investment in public schoolinfrastructure affects students’ achievement. We use data onextra funding to public high schools after the 2012 NorthernItaly earthquake and apply a quasi-experimental designand an instrumental variable strategy. We find that spendingon school infrastructure increases standardized test scores inmathematics and Italian language, and the effect is strongerfor lower-achieving students and in mathematics. These resultsprovide evidence in favour of a positive impact of capitalspending in improving the learning environment and performancesof high school students.