The efficiency of governments may be influenced by institutional factors and by the intensity of monitoring by citizens. This paper develops a theory of optimal monitoring and then uses frontier estimation techniques to construct measures of efficiency f or police departments in 141 cities. Using these efficiency measures, i t is possible to test the extent to which efficiency is influenced by the presence of a professional city manager and by characteristics of th e citizens.

This paper seeks to determine whether the underlying assumption of utility maximization can be empirically validated for the local public sector. In addition, three alternative functional forms of a system of demands are compared on the basis of their theoretical restrictions as well as their predictive performance. Based upon a likelihood ratio test we find that the restrictions implied by utility maximization are too restrictive to be consistent with the unrestricted estimates. Once integrability restrictions are imposed, however, both CES and Cobb-Douglas utility functions are consistent with the data. The unrestricted estimates had the best predictive performance based on information inaccuracy.

Equality and efficiency are key issues in educational reform. Here the authors analyze the efficiency and equality consequences of various school finance reforms using a cost-indirect output distance function. This function readily models multiple-output production under conditions of budgetary constraint, and provides a natural measure of performance that is closely related to Farrell-type measures of efficiency. The analysis suggests that despite school district inefficiency, finance reforms can affect student achievement. However, any potential gains in output from redistribution are dwarfed by the potential gains from increased efficiency. More strikingly, the analysis demonstrates that budgetary reforms designed to equalize expenditures could actually increase the inequality of student achievement.