LOCAL PUBLIC SERVICE PROVISION, BUDGET ALLOCATION AND ECONOMIES-OF-SCALE: THE CASE STUDIES OF CITY AND TOWN MUNICIPALITIES
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Abstract
This paper presents an empirical analysis on theme of local service provision and budget allocation of the city municipalities and the town municipalities, based on data compiled by the Office of the Decentralization to the Local Government Organization Committee. The units of analysis were 25 city municipalities and 126 town municipalities with the same characteristics. Their allocated budgets are grouped into 5 main functions, namely, infrastructure; welfare for the elderly, disabled and aids victims; children and educational management; environmental management; and others (such as prevention and mitigation of public disaster) in order to be responsive to the needs for public services of the local people. The researcher took the data on the amount and proportion of budgets to be analyzed. The analysis results can be concluded as follows: (a) the per capita budgets of city municipality and town municipality are not significantly different (t-test = -0.9620); (b) the ratios of the five categories of public service expenditures to total expenditure differ between the city municipality and the town municipality; and (c) there exists economies-of-scale as measured by the nature of increasing cost at decreasing rate when the scale of operation increases. The mean comparison test and regression are adopted in this study with coefficients of population (0.72) and the marginal cost of public services reported.
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