Level of services, spatial dependence and allocative efficiency in local governments

In the public economics literature expenditure needs, allocative efficiency and spatial dependence of local governments costs have been widely analysed separately implying bias estimations of the expenditure needs at local level. An original procedure that simultaneously takes into account the standard level of services, the allocative efficiency and the spatial proximity among Municipalities, has been proposed. The estimation strategy has been applied on a very detailed database of more than 4,000 Italian Municipalities for the year 2013.