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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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
16493.
Find related papers by JEL classification: H50 - Public Economics - - National Government Expenditures and Related Policies - - - General H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Semiparametric and Nonparametric Methods
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