Technological Gaps in the Performance of Victorian Local Government: An Application of the Meta-Frontier Network Data Envelopment Analysis Approach

The empirical analysis of local government efficiency has spawned a substantial literature. However, to date, few studies have investigated municipal performance by council type under both a meta-frontier framework and a network structure approach. This chapter addresses this gap in the literature by examining the performance of 41 urban and 38 regional Victorian councils under a common framework and in a network structure of financial activity and service provision. Using a meta-frontier network data envelopment analysis for the period of 2014/15–2018/19, we find that regional councils have divisional and network efficiency scores slightly higher than those of urban councils. However, when all councils are placed in a common framework, urban councils are more efficient than their regional counterparts using their own production technology, with meta-technological gap ratios of 0.880 and 0.826, respectively. A sensitivity analysis of divisional weights in a network operational structure indicates that a higher weight placed on service provision could improve the technological gaps of councils and bring them closer to the full meta-frontier production technology of the whole sector. This underscores the importance of public service provision in the performance of Victorian local government. Various policy implications are thus indicated.