Public sector efficiency in transition and beyond: evidence from Czech local governments

This article provides the first comparison of public sector efficiency in and beyond transition. We compare the comprehensive efficiency scores of 202 local governments in the Czech Republic in the transition period of 1995-1998 and the post-transition period of 2005-2008 and identify the period-specific determinants of local government efficiency. We observe convergence to the best practice frontier but also a growing efficiency gap between small and large governments. In both periods, municipal size and the main fiscal variables qualitatively affect efficiency in the same direction and in line with the fiscal stress hypothesis. Left-wing ideology is only robustly associated with cost inefficiency in the transition period. The geographic distances begin to matter for efficiency only in the post-transition period.