Explaining differences in productive efficiency: An application to Belgian municipalities

The purpose of this paper is to measure and explain variations in productive efficiency of municipal governments in Belgium. Technical efficiency is evaluated using a non-parametric method based on the Free Disposal Hull (FDH) reference technology. We first calculate input, output, and graph Farrell efficiency measures for a cross-section of all 589 Belgian municipalities. In a second stage of the analysis we explain the calculated differences in efficiency in terms of variables related to the structural characteristics of municipalities and to the institutional environment.