Stochastic Frontier Estimation: an Application to Local Governments in Malaysia

The purpose of this paper is to estimate the level of efficiency of local governments in Malaysia in providing public goods and services. The study employs the frontier technique to measure efficiency. The study involved 99 local governments in Peninsular Malaysia, categorised into three components: City councils, municipalities and district councils. The results of the study indicate that local councils are inefficient in providing local public goods and services. The cost efficiency scores range from 0.145 to 1.643 with Jempol District Council being the least inefficient. The results also indicate that municipal councils are more inefficient than district councils.