An evaluation of economic efficiency of finnish regions by DEA and Tobit models

Private sector economic efficiency of 83 Finnish regions (labour market areas) in 1988-1999 is investigated by a two stage procedure. In the first stage non-parametric Data Envelopment Analysis (DEA) is used for calculating a best practise production frontier and relative efficiency scores for the regions. Outputs are regional value added and personal direct real income from employment. Inputs of the study include capital stock, employment by education level, years of schooling and volume of local public sector activity. In the second stage, regional differences in efficiency are studied by explaining inefficiency scores (1-efficiency scores) by econometric Tobit models. Here the independent variables include factors which were not explicitly included in the DEA-models such as size (population), location (economic distance) and production structure of regions.

Cost Efficiency of Finnish Municipalities 1994-2002. An Application of DEA and Tobit methods

Cost efficiency of basic welfare service provision in 353 Finnish municipalities in 1994-2002 is investigated in an ongoing study. The municipal sector has a central role in the Finnish economy as a provider of welfare services. Data Envelopment Analysis (DEA), a non-parametric linear programming method is employed, calculating a best practise production frontier for the decision making units, and comparing the various DMUs with this frontier. The inputs consisted of four to ten of the most important services in health, social and educational sector. As the combined output, total real production costs of these services were used. According to the results efficiency differences were considerable between the municipalities, and a small group of a peripheral municipalities scored clearly below the others. Annual changes in cost efficiency were estimated. At the second stage, differences in the DEA efficiency scores were explained by using Tobit panel models. It was found that larger population and peripheral geographic position tend to reduce efficiency of municipal service production, while higher education level of inhabitants increases it.

Performance of municipalities, politics and leadership

Peer reviewe

Missä on kaupunkitalous-kirjan "amerikkalainen" näkökulma?

Kommentti Anne Hailan arviointiin Tieteessä tapahtuu -lehdessä 7/2004 tämän artikkelin kirjoittajien kirjasta Kaupunkitalous. Johdatus kapungistumiseen, kaupunkien maankäyttöön sekä yritysten ja kotitalouksien sijoittumiseen (Gaudeamus 2004