Does municipality’s self-generated income influence the efficiency of its public spending?

The objective of this paper is to examine whether municipalities’ self-generated income influences the efficiency of local public expenditures in the context of fiscal decentralization in Cameroon. Using a balanced panel of 100 communes over the period 2017–2020 and a stochastic frontier analysis model, this study distinguishes between the absolute level of self-generated income and its share in total municipal revenue. The results suggest that higher levels of self-generated income are associated with lower spending efficiency, while a higher proportion of self-generated income in total revenue is positively associated with efficiency. These contrasting effects point to the coexistence of different institutional mechanisms, notably soft budget constraints and accountability incentives. While the findings should be interpreted with caution, they provide new empirical evidence for Cameroon and contribute to the debate on fiscal decentralization and local government efficiency.