Long‐ and Short‐Term Cost Efficiency Frontier Evaluation: Evidence from Spanish Local Governments*

This paper analyses the efficiency of Spanish local governments using non‐convex frontier methods. More specifically, it analyses the total cost inefficiency and proposes its decomposition into three additive components: short‐term variable cost inefficiency; capacity utilisation of fixed inputs; and scale inefficiency. The second and third components correspond to the long‐term cost efficiency notion. The proposition is applied to a sample of Spanish municipal councils (municipalities with over 2,000 inhabitants located in Catalonia, the Spanish north‐eastern region). The results confirm the existence of significant cost inefficiency coefficients related to both the long and short term.