Efficiency in local educational funding : data envelope analysis of municipal allocation

Decentralization of education finance involves transferring financial decision-making from central to local government. Recently, local municipalities, particularly in Israel, have assumed a more prominent role in allocating supplemental educational resources. This study examines the efficiency of these allocations in Israel. Using bootstrap Data Envelopment Analysis on 83 municipalities for 2019-2020, we found low efficiency in resource allocation, indicating that the same output could be achieved while reducing local resources by 56%. Regression analysis reveals a U-shaped relationship between efficiency and socioeconomic status overall, but a positive relationship for municipalities with a large percentage of majority residents. These findings have significant policy implications. Municipalities could consider implementing efficiency reforms, whereas the central government could design targeted plans and policies to enhance local resource allocation efficiency. This study contributes to the literature on resource efficiency  and provides valuable insights for policymakers and administrators.