Benchmarking the performance of US Municipalities

This paper examines the performance of US municipal governments over 1997–2012, and hence prior to, during and following the financial crisis of 2007–2008. Fully nonparametric methods are employed to estimate technical efficiencies of cities utilizing recently developed statistical results. The results strongly suggest non-convexity of the local governments’ production set, calling into question the results of previous studies examining municipal efficiency that do not allow for non-convexity. We find strong evidence that production sets for municipal governments are different across time and across regions of the USA. Overall, we find that municipalities in the Midwest and South on average out-performed those in the Northeast and West in terms of both efficiency and productivity, and both before and after the financial crisis.