Whereas a substantial empirical literature has investigated scale economies in local government, by contrast little effort has been directed at economies of scope. Indeed, to date, very few published studies on scope economies in local government exist using non-parametric methods. In order to address this gap in the literature, this paper empirically examines economies of scope in Portuguese local government and the extent to which it explains differential council performance.
The paper employs a model using geometric distance functions and an augmented Hicks-Moorsteen Index to analyze the performance of 308 Portuguese councils over the period 2008 to 2015. Our results demonstrate that a majority of councils which ‘externalize’ service provision face diseconomies of scope which increase in proportion to the externalization of service provision. Various policy implications are drawn from the analysis as well as recommendations for future research.
Caldas, P., Dollery, B., & Marques, R. (2018). Economies of Scope in Portuguese Local Councils. Regional Studies, (in print).