Efficiency in Danish Local Governments: What Sets the Best Apart?

Based on a new comprehensive measure of local government efficiency in Denmark, we identify characteristics of efficient local governments. We find that managerial, political, and structural variables are correlated with local government efficiency. In relation to management, we find that not only a higher level of sickness absence among municipal employees but also (and perhaps more surprisingly) a higher degree of professionalization of local government administration—in the form of a greater proportion of employees with a university degree—is negatively correlated with efficiency. In relation to politics, we find that both a higher tax level and a greater left-wing composition of the municipal board are negatively correlated with efficiency. We also analyze service levels in the same way and suggest an approach to disentangle whether low service provision is due to inefficiency or a lack of resources. The analyses are conducted using both country-wide comparisons and local comparisons among neighboring municipalities only.