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Measuring and Explaining Country Efficiency in Improving Health and Education Indicators

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  • Jayasuriya, Ruwan
  • Wodon, Quentin

Abstract

Governments aiming to improve the education and health status of their populations can increase the level of public spending allocated to these sectors, or improve the efficiency of public spending. Since increasing spending is often difficult due to the limited tax base of most developing countries, improving the efficiency of public spending becomes crucial. In order to improve this efficiency, governments have at least two options. The first consists of changing the allocation mix of public expenditures. The second option is more ambitious; it consists of implementing wide-ranging institutional reforms in order to improve variables such as the overall level of bureaucratic quality and corruption in a country, with the hope that this will improve the efficiency of public spending for the social sectors, among other things. In this paper, we use stochastic production frontier estimation methods to compare the impact of the level of public spending on education and health outcomes on the one hand, and the efficiency in spending on the other hand, using life expectancy and net enrolment in primary school as outcome indicators. After estimating efficiency measures at the country level, we analyze in a second step how the quality of the bureaucracy, corruption, and urbanization affect efficiency. We find that urbanization, and to some extent the quality of the bureaucracy are strong determinants of the efficiency of countries in improving education and health outcomes, while the impact of corruption is not statistically significant. Together, these three variables alone explain up to half of the variation in efficiency measures between countries.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 11183.

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Date of creation: Jun 2003
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Handle: RePEc:pra:mprapa:11183

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Keywords: Millennium Development Goals; education; health; production functions; stochastic frontier;

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References

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  1. Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, Elsevier, vol. 2(6), pages 429-444, November.
  2. Battese, George E., 1992. "Frontier production functions and technical efficiency: a survey of empirical applications in agricultural economics," Agricultural Economics: The Journal of the International Association of Agricultural Economists, International Association of Agricultural Economists, International Association of Agricultural Economists, vol. 7(3-4), October.
  3. TULKENS, Henry & VANDEN EECKAUT, Philippe, 1993. "Non-Parametric Efficiency, Progress and Regress Measures for Panel Data : Methodological Aspects," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 1993016, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Christiaensen, Luc & Scott, Christopher & Wodon, Quentin, 2002. "Development Targets and Costs," MPRA Paper 12299, University Library of Munich, Germany.
  5. Battese, George E., 1992. "Frontier production functions and technical efficiency: a survey of empirical applications in agricultural economics," Agricultural Economics, Blackwell, Blackwell, vol. 7(3-4), pages 185-208, October.
  6. Fried, Harold O. & Lovell, C. A. Knox & Schmidt, Shelton S. (ed.), 1993. "The Measurement of Productive Efficiency: Techniques and Applications," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780195072181, October.
  7. Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, Springer, vol. 20(2), pages 325-32.
  8. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, Elsevier, vol. 6(1), pages 21-37, July.
  9. Kirjavainen, Tanja & Loikkanen, Heikki, 1996. "Efficiency Differences of Finnish Senior Secondary Schools: An Application of DEA and Tobit-Analysis," Discussion Papers, The Research Institute of the Finnish Economy 570, The Research Institute of the Finnish Economy.
  10. Fakin, Barbara & de Crombrugghe, Alain, 1997. "Field adjustments in transition economies : social transfers and the efficiency of public spending - a comparison with OECD countries," Policy Research Working Paper Series 1803, The World Bank.
  11. Keiko Honjo & Marijn Verhoeven & Sanjeev Gupta, 1997. "The Efficiency of Government Expenditure," IMF Working Papers 97/153, International Monetary Fund.
  12. Grossman, Philip J. & Mavros, Panayiotis & Wassmer, Robert W., 1999. "Public Sector Technical Inefficiency in Large U.S. Cities," Journal of Urban Economics, Elsevier, vol. 46(2), pages 278-299, September.
  13. Grosskopf, S. & Valdmanis, V., 1987. "Measuring hospital performance : A non-parametric approach," Journal of Health Economics, Elsevier, Elsevier, vol. 6(2), pages 89-107, June.
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Cited by:
  1. David Hauner & Annette Kyobe, 2008. "Determinants of Government Efficiency," IMF Working Papers 08/228, International Monetary Fund.
  2. Santiago Herrera & Gaobo Pang, 2006. "How Efficient is Public Spending in Education?," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE, BANCO DE LA REPÚBLICA - ESPE.
  3. Simon Feeny & Mark Rogers, 2008. "Public sector efficiency, foreign aid and small island developing states," Journal of International Development, John Wiley & Sons, Ltd., vol. 20(4), pages 526-546.
  4. Herrera, Santiago & Pang, Gaobo, 2005. "Efficiency of public spending in developing countries : an efficiency frontier approach," Policy Research Working Paper Series 3645, The World Bank.
  5. Enlinson Mattos & Fabiana Rocha & Lucas Novaes & Paulo Arvate & Verônica Orellano, 2009. "Economias de escala na oferta de serviços públicos de saúde: um estudo para os municípios paulistas," Economia, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics], ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 10(2), pages 357_386.

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