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Public sector efficiency: Leveling the playing field between OECD countries

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  • Adam, Antonis
  • Delis, Manthos D
  • Kammas, Pantelis

Abstract

In this paper we seek a robust methodology to measure the relative public spending efficiency of 19 OECD countries over the period 1980-2000. Based on the functional classification of government expenditure, we decompose total public spending into its separate accounts and we employ a semi-parametric method to obtain relative efficiency scores (for the separate accounts as well as for aggregate public spending). The econometric method isolates the impact of government inefficiency from the inefficiency arising from the socioeconomic environment or luck, thus leveling the playing field between the examined countries. The results suggest that the quality of governance is more important than the socioeconomic environment or luck. Finally, we propose a technique to measure the allocative efficiency of public spending, in an effort to proxy the optimal allocation of public funds when the governments set specific targets.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 16493.

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Date of creation: 18 Dec 2008
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Handle: RePEc:pra:mprapa:16493

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Keywords: Public spending; Technical and allocative efficiency; Stochastic DEA;

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References

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  1. Dennis D. Kimko & Eric A. Hanushek, 2000. "Schooling, Labor-Force Quality, and the Growth of Nations," American Economic Review, American Economic Association, vol. 90(5), pages 1184-1208, December.
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  9. Konstantinos Angelopoulos & Apostolis Philippopoulos & Efthymios Tsionas, 2008. "Does public sector efficiency matter? Revisiting the relation between fiscal size and economic growth in a world sample," Public Choice, Springer, vol. 137(1), pages 245-278, October.
  10. Antonis Adam & Manthos D. Delis & Pantelis Kammas, 2008. "Fiscal Decentralization and Public Sector Efficiency: Evidence from OECD Countries," CESifo Working Paper Series 2364, CESifo Group Munich.
  11. António Afonso & Ludger Schuknecht & Vito Tanzi, 2005. "Public sector efficiency: An international comparison," Public Choice, Springer, vol. 123(3), pages 321-347, June.
  12. Konstantinos Angelopoulos & Apostolis Philippopoulos, 2005. "The Role of Government in Anti-Social Redistributive Activities," CESifo Working Paper Series 1427, CESifo Group Munich.
  13. Antonio Afonso & Ludger Schuknecht & Vito Tanzi, 2010. "Public sector efficiency: evidence for new EU member states and emerging markets," Applied Economics, Taylor & Francis Journals, vol. 42(17), pages 2147-2164.
  14. Tavares, Jose, 2004. "Does right or left matter? Cabinets, credibility and fiscal adjustments," Journal of Public Economics, Elsevier, vol. 88(12), pages 2447-2468, December.
  15. Duncombe, William & Miner, Jerry & Ruggiero, John, 1997. " Empirical Evaluation of Bureaucratic Models of Inefficiency," Public Choice, Springer, vol. 93(1-2), pages 1-18, October.
  16. Filip Palda, 2001. "Fiscal Churning and Political Efficiency," Public Economics 0111008, EconWPA.
  17. Emili Tortosa Ausina & Diego Prior & María Teresa Balaguer-Coll, 2004. "On The Determinants Of Local Government Performance: A Two-Stage Nonparametric Approach," Working Papers. Serie EC 2004-04, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  18. Cornwell, Christopher & Schmidt, Peter & Sickles, Robin C., 1990. "Production frontiers with cross-sectional and time-series variation in efficiency levels," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 185-200.
  19. H. Fried & C. Lovell & S. Schmidt & S. Yaisawarng, 2002. "Accounting for Environmental Effects and Statistical Noise in Data Envelopment Analysis," Journal of Productivity Analysis, Springer, vol. 17(1), pages 157-174, January.
  20. António Afonso & Miguel St. Aubyn, 2004. "Non-parametric Approaches to Education and Health Expenditure Efficiency in OECD Countries," Working Papers Department of Economics 2004/01, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  21. Hayes, Kathy J & Razzolini, Laura & Ross, Leola B, 1998. " Bureaucratic Choice and Nonoptimal Provision of Public Goods: Theory and Evidence," Public Choice, Springer, vol. 94(1-2), pages 1-20, January.
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Cited by:
  1. Antonis Adam & Manthos D. Delis & Pantelis Kammas, 2008. "Fiscal Decentralization and Public Sector Efficiency: Evidence from OECD Countries," CESifo Working Paper Series 2364, CESifo Group Munich.
  2. Sok-Gee Chan Mohd & Zaini Abd Karim, 2012. "Public Spending Efficiency And Political And Economic Factors: Evidence From Selected East Asian Countries," Economic Annals, Faculty of Economics, University of Belgrade, vol. 57(193), pages 7-24, April- Ju.
  3. Stephanie Meinhard & Niklas Potrafke, 2011. "The Globalization-welfare State Nexus Reconsidered," Working Paper Series of the Department of Economics, University of Konstanz 2011-27, Department of Economics, University of Konstanz.

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