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Quality of Government and Living Standards

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  • Francesco Grigoli Author-Email: fgrigoli@imf.org Author-Name: Eduardo Ley Author-Email: eley@worldbank.org

    (World Bank)

Abstract

It is generally acknowledged that a government’s output is difficult to define and its value is hard to measure. The practical solution adopted by national accounts systems is to equate output value to input costs, but well-documented inefficiencies in government activities make this approximation questionable. One solution is to purge from gross domestic product (GDP) the fraction of government inputs that is wasted. This note illustrates such a correction, computing corrected per capita GDP on the basis of two studies that estimate efficiency scores for several dimensions of government activities. Results show that the correction could be significant and reorder the rankings of living standards.

Suggested Citation

  • Francesco Grigoli Author-Email: fgrigoli@imf.org Author-Name: Eduardo Ley Author-Email: eley@worldbank.org, 2012. "Quality of Government and Living Standards," World Bank - Economic Premise, The World Bank, issue 89, pages 1-6, September.
  • Handle: RePEc:wbk:prmecp:ep89
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    References listed on IDEAS

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    1. Nazmul Chaudhury & Jeffrey Hammer & Michael Kremer & Karthik Muralidharan & F. Halsey Rogers, 2006. "Missing in Action: Teacher and Health Worker Absence in Developing Countries," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 91-116, Winter.
    2. 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.
    3. Angus Deaton & Alan Heston, 2010. "Understanding PPPs and PPP-Based National Accounts," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(4), pages 1-35, October.
    4. Francesco Grigoli & Eduardo Ley, 2012. "Quality of Government and Living Standards; Adjusting for the Efficiency of Public Spending," IMF Working Papers 12/182, International Monetary Fund.
    5. Rajkumar, Andrew Sunil & Swaroop, Vinaya, 2008. "Public spending and outcomes: Does governance matter?," Journal of Development Economics, Elsevier, vol. 86(1), pages 96-111, April.
    6. Nazmul Chaudhury & Jeffrey S. Hammer, 2004. "Ghost Doctors: Absenteeism in Rural Bangladeshi Health Facilities," World Bank Economic Review, World Bank Group, vol. 18(3), pages 423-441.
    7. repec:pri:rpdevs:understanding_ppps_complete_with_abstract_14nov08.pdf is not listed on IDEAS
    8. repec:pri:rpdevs:understanding_ppps_complete_with_abstract_14nov08 is not listed on IDEAS
    9. Michael Kremer & Nazmul Chaudhury & F. Halsey Rogers & Karthik Muralidharan & Jeffrey Hammer, 2005. "Teacher Absence in India: A Snapshot," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 658-667, 04/05.
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    Citations

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    Cited by:

    1. Musharraf Cyan & Jorge Martinez-Vazquez & VIoleta Vulovic, 2013. "Measuring tax effort: Does the estimation approach matter and should effort be linked to expenditure goals?," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1308, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    2. Francesco Grigoli & Javier Kapsoli, 2013. "Waste Not, Want Not; The Efficiency of Health Expenditure in Emerging and Developing Economies," IMF Working Papers 13/187, International Monetary Fund.

    More about this item

    JEL classification:

    • B0 - Schools of Economic Thought and Methodology - - General
    • E0 - Macroeconomics and Monetary Economics - - General
    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

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