IDEAS home Printed from https://ideas.repec.org/p/zbw/agawps/14.html
   My bibliography  Save this paper

Public sector efficiency in Europe: Long-run trends, recent developments and determinants

Author

Listed:
  • Christl, Michael
  • Köppl-Turyna, Monika
  • Kucsera, Dénes

Abstract

This paper investigates the efficiency of the public sector in a sense of public performance and expenditures. For 23 European countries and for the period between 1995 and 2015 we construct a measure of public sector performance that consist of nine distinct indices for each area of public policy, such as administration, health education, economic performance, security and infrastructure. We use several efficiency techniques (FDH, order-m) and investigate input- and output-oriented efficiency of the public sector. We find that countries with small public sectors tend to be more efficient no matter which efficiency techniques we use. Because of the relatively long time span of our data, our study contributes to the literature by analyzing the effect of the financial crisis on the efficiency of the public sector in European countries. We show that after the crisis, the public sector efficiency increased especially in countries with small public sectors, while it stayed constant or worsened in countries with big public sectors. Finally, we analyze in more depth the impact of fiscal decentralization and fiscal rules on the public sector efficiency. We conclude that while decentralization is fostering efficiency, fiscal rules do not have any effect. Moreover, fiscal rules combined with decentralization may harm efficiency, consistently with the ratchet effect.

Suggested Citation

  • Christl, Michael & Köppl-Turyna, Monika & Kucsera, Dénes, 2018. "Public sector efficiency in Europe: Long-run trends, recent developments and determinants," Working Papers 14, Agenda Austria.
  • Handle: RePEc:zbw:agawps:14
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/176850/1/1016594453.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. John Ashworth & Emma Galli & Fabio Padovano, 2013. "Decentralization as a constraint to Leviathan: a panel cointegration analysis," Public Choice, Springer, vol. 156(3), pages 491-516, September.
    2. Geys, Benny & Heinemann, Friedrich & Kalb, Alexander, 2010. "Voter involvement, fiscal autonomy and public sector efficiency: Evidence from German municipalities," European Journal of Political Economy, Elsevier, vol. 26(2), pages 265-278, June.
    3. De Borger, B & Kerstens, K. & Moesen, W. & Vanneste, J., 1994. "Explaining Differences in Productive Efficiency: An Application to Belgian Municipalities," Public Choice, Springer, vol. 80(3-4), pages 339-358, September.
    4. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 1999. "The Quality of Government," Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(1), pages 222-279, April.
    5. Samya Beidas-Strom, 2017. "What has happened to Sub-Regional Public Sector Efficiency in England since the Crisis?," IMF Working Papers 17/36, International Monetary Fund.
    6. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416-416.
    7. Tanzi,Vito & Schuknecht,Ludger, 2000. "Public Spending in the 20th Century," Cambridge Books, Cambridge University Press, number 9780521662918, April.
    8. Gordon, Nora, 2004. "Do federal grants boost school spending? Evidence from Title I," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 1771-1792, August.
    9. Besley, Timothy & Smart, Michael, 2007. "Fiscal restraints and voter welfare," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 755-773, April.
    10. Tanzi, Vito & Schuknecht, Ludger, 1997. "Reconsidering the Fiscal Role of Government: The International Perspective," American Economic Review, American Economic Association, vol. 87(2), pages 164-168, May.
    11. Raffaela Giordano & Pietro Tommasino, 2013. "Public-Sector Efficiency and Political Culture," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 69(3), pages 289-316, September.
    12. Goel, Rajeev K. & Mazhar, Ummad & Nelson, Michael A. & Ram, Rati, 2017. "Different forms of decentralization and their impact on government performance: Micro-level evidence from 113 countries," Economic Modelling, Elsevier, vol. 62(C), pages 171-183.
    13. Aurélie Cassette & Sonia Paty, 2010. "Fiscal decentralization and the size of government: a European country empirical analysis," Public Choice, Springer, vol. 143(1), pages 173-189, April.
    14. Lars-Erik Borge & Torberg Falch & Per Tovmo, 2008. "Public sector efficiency: the roles of political and budgetary institutions, fiscal capacity, and democratic participation," Public Choice, Springer, vol. 136(3), pages 475-495, September.
    15. Enikolopov, Ruben & Zhuravskaya, Ekaterina, 2007. "Decentralization and political institutions," Journal of Public Economics, Elsevier, vol. 91(11-12), pages 2261-2290, December.
    16. Jin, Jing & Zou, Heng-fu, 2002. "How does fiscal decentralization affect aggregate, national, and subnational government size?," Journal of Urban Economics, Elsevier, vol. 52(2), pages 270-293, September.
    17. Silika Prohl & Friedrich Schneider, 2009. "Does Decentralization Reduce Government Size? A Quantitative Study of the Decentralization Hypothesis," Public Finance Review, , vol. 37(6), pages 639-664, November.
    18. Ernesto Stein, 1999. "Fiscal Decentralization and Government Size in Latin America," Journal of Applied Economics, Universidad del CEMA, vol. 2, pages 357-391, November.
    19. repec:ifs:fistud:v:38:y:2017:i::p:141-171 is not listed on IDEAS
    20. Hauner, David & Kyobe, Annette, 2010. "Determinants of Government Efficiency," World Development, Elsevier, vol. 38(11), pages 1527-1542, November.
    21. Lorenz Blume & Jens Müller & Stefan Voigt & Carsten Wolf, 2009. "The economic effects of constitutions: replicating—and extending—Persson and Tabellini," Public Choice, Springer, vol. 139(1), pages 197-225, April.
    22. Isabelle Joumard & Per Mathis Kongsrud & Young-Sook Nam & Robert Price, 2004. "Enhancing the Cost Effectiveness of Public Spending: Experience in OECD Countries," OECD Economic Studies, OECD Publishing, vol. 2003(2), pages 109-161.
    23. Torsten Persson & Guido Tabellini, 2004. "Constitutional Rules and Fiscal Policy Outcomes," American Economic Review, American Economic Association, vol. 94(1), pages 25-45, March.
    24. Afonso, Antonio & St. Aubyn, Miguel, 2006. "Cross-country efficiency of secondary education provision: A semi-parametric analysis with non-discretionary inputs," Economic Modelling, Elsevier, vol. 23(3), pages 476-491, May.
    25. Jon H. Fiva, 2006. "New Evidence on the Effect of Fiscal Decentralization on the Size and Composition of Government Spending," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 62(2), pages 250-280, June.
    26. Gupta, Sanjeev & Verhoeven, Marijn, 2001. "The efficiency of government expenditure: experiences from Africa," Journal of Policy Modeling, Elsevier, vol. 23(4), pages 433-467, May.
    27. Luis R. Murillo-Zamorano, 2004. "Economic Efficiency and Frontier Techniques," Journal of Economic Surveys, Wiley Blackwell, vol. 18(1), pages 33-77, February.
    28. De Borger, Bruno & Kerstens, Kristiaan, 1996. "Cost efficiency of Belgian local governments: A comparative analysis of FDH, DEA, and econometric approaches," Regional Science and Urban Economics, Elsevier, vol. 26(2), pages 145-170, April.
    29. Nakil Sung, 2007. "Information technology, efficiency and productivity: evidence from Korean local governments," Applied Economics, Taylor & Francis Journals, vol. 39(13), pages 1691-1703.
    30. António Afonso & Ludger Schuknecht & Vito Tanzi, 2005. "Public sector efficiency: An international comparison," Public Choice, Springer, vol. 123(3), pages 321-347, June.
    31. Rodden, Jonathan, 2003. "Reviving Leviathan: Fiscal Federalism and the Growth of Government," International Organization, Cambridge University Press, vol. 57(04), pages 695-729, September.
    32. Antonis Adam & Manthos Delis & Pantelis Kammas, 2014. "Fiscal decentralization and public sector efficiency: evidence from OECD countries," Economics of Governance, Springer, vol. 15(1), pages 17-49, February.
    33. 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.
    34. 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.
    35. Alberto Alesina & Reza Baqir & William Easterly, 1999. "Public Goods and Ethnic Divisions," The Quarterly Journal of Economics, Oxford University Press, vol. 114(4), pages 1243-1284.
    36. Geys, Benny, 2006. "Looking across borders: A test of spatial policy interdependence using local government efficiency ratings," Journal of Urban Economics, Elsevier, vol. 60(3), pages 443-462, November.
    37. Beetsma, Roel M. W. J. & Lans Bovenberg, A., 1997. "Designing fiscal and monetary institutions in a second-best world," European Journal of Political Economy, Elsevier, vol. 13(1), pages 53-79, February.
    38. Kaja Fredriksen, 2013. "Fiscal Consolidation Across Government Levels - Part 2. Fiscal Rules for Sub-central Governments, Update of the Institutional Indicator," OECD Economics Department Working Papers 1071, OECD Publishing.
    39. Axel Dreher, 2006. "Does globalization affect growth? Evidence from a new index of globalization," Applied Economics, Taylor & Francis Journals, vol. 38(10), pages 1091-1110.
    40. 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.
    41. repec:hrv:faseco:30747160 is not listed on IDEAS
    42. Isabelle Joumard & Per Mathis Kongsrud & Young-Sook Nam & Robert W. R. Price, 2004. "Enhancing the Effectiveness of Public Spending: Experience in OECD Countries," OECD Economics Department Working Papers 380, OECD Publishing.
    43. Weingast, Barry R., 2009. "Second generation fiscal federalism: The implications of fiscal incentives," Journal of Urban Economics, Elsevier, vol. 65(3), pages 279-293, May.
    44. Christian Bruns & Oliver Himmler, 2011. "Newspaper Circulation and Local Government Efficiency," Scandinavian Journal of Economics, Wiley Blackwell, vol. 113, pages 470-492, June.
    45. Victoria Gunnarsson & Stéphane Carcillo & Marijn Verhoeven, 2007. "Education and Health in G7 Countries; Achieving Better Outcomes with Less Spending," IMF Working Papers 07/263, International Monetary Fund.
    46. Thushyanthan Baskaran & Lars P. Feld, 2013. "Fiscal Decentralization and Economic Growth in OECD Countries," Public Finance Review, , vol. 41(4), pages 421-445, July.
    47. da Cruz, Nuno Ferreira & Marques, Rui Cunha, 2014. "Revisiting the determinants of local government performance," Omega, Elsevier, vol. 44(C), pages 91-103.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    public sector; efficiency; order-m; input-oriented efficiency; output-oriented efficiency; decentralization; fiscal rules;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:agawps:14. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics). General contact details of provider: http://edirc.repec.org/data/agendat.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.