Reducing the Administrative Expenditures as Source for Increasing the Efficiency of Local Governance Under Conditions of the Financial Crisis

Abstract

In the last 10-15 years the preoccupation concerning administrative expenses were expressed in concrete initiatives. The networks concerning Standard Costs Model (SCM) are worth mentioning for reducing administrative expenses in private business area. European Commission elaborated and is currently implementing a strategy for reducing administrative costs for business inside EU.

Similar initiatives can be found at OECD, World Bank and in numerous other European states, and not only, such as USA, UK, Denmark, Netherlands, Sweden, Norway and others.

Financial crisis emphasized the preoccupation for administrative expenses reduction. The analysis and measurements focus was transferred towards public business area where most of the states proposed short term strategies to reduce the mentioned expenses. In this context, the strategies comprised all governance levels were expressed in concrete measures to reduce administrative expenses for administrative structure and local public services etc.

In many of the situations, the resulted sums from the administrative expenses reductions were redirected towards production process concluding in the maintaining of public service production and increasing its efficiency related to workforce.

In this context, the present paper aims to generate economic models that determine the influence of administrative expenses reduction on public services efficiency and, based on these, to formulate conclusions on local governance efficiency.

Keywords: reducing the administrative expenditures, financial crisis, efficiency, local governance

JEL Classification: H72, D24, E62