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Assessing Public Spending Efficiency in 20 OECD Countries

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Inequality and Finance in Macrodynamics

Part of the book series: Dynamic Modeling and Econometrics in Economics and Finance ((DMEF,volume 23))

Abstract

We follow the framework of Afonso et al. (Public Choice, 123(3–4):321–47, 2005), to look at the public expenditure of 20 OECD countries for the period 2009–2013, from an efficiency perspective. We construct Public Sector Performance and Public Sector Efficiency indicators and use Data Envelopment Analysis. The results show that the only country that performed on the efficiency frontier is Switzerland, Canada, Japan, Luxembourg and the United States are also more efficient performers. The average input-oriented efficiency score is equal to 0.732. That is, on average countries could have reduced the level of public expenditure by 26.8% and still achieved the same level of public performance. The average output-oriented efficiency score is 0.769 denoting that on average the sample countries could have increased their performance by 23.1% by employing the same level of public expenditure.

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Acknowledgements

UECE is supported by the Fundacào para a Ciência e a Tecnologia (Portuguese Foundation for Science and Technology).We thank an anonymous referee and participants at the 2016 Public Sector Economics Conference organised by the Institute of Public Finance, Zagreb. The opinions expressed herein are those of the authors and do not necessarily reflect those of the authors’ employers.

Author information

Authors and Affiliations

  1. Department of Economics, ISEG/Lisbon—Universidade de Lisboa, R. Miguel Lupi 20, 1249-078, Lisbon, Portugal

    António Afonso

  2. UECE—Research Unit on Complexity and Economics, ISEG/Lisbon—Universidade de Lisboa, R. Miguel Lupi 20, 1249-078, Lisbon, Portugal

    António Afonso

  3. ISEG/ULisbon—University of Lisbon, R. Miguel Lupi 20, 1249-078, Lisbon, Portugal

    Mina Kazemi

Authors
  1. António Afonso
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  2. Mina Kazemi
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Corresponding author

Correspondence to António Afonso .

Editor information

Editors and Affiliations

  1. Department of Business Administration and Economics, Bielefeld University, Bielefeld, Germany

    Bettina Bökemeier

  2. Department of Business Administration and Economics, Bielefeld University, Bielefeld, Germany

    Alfred Greiner

Appendix

Appendix

See Figs. 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32.

Fig. 16
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Detailed list of output components

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Fig. 17
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Detailed list of input components (Expenditure Categories)

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Fig. 18
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Public Expenditure (% of GDP) 2004–2013. Sources: The World Bank, European Commission (AMECO), OECD database, UIS Statistics

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Fig. 19
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Public Sector Performance (PSP) Indicators excluding Switzerland, 2009–2013

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Fig. 20
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DEA results (Model 3) 2009–2013 Model 3—1 Input (Normalized Government Consumption), 1 Output (Administration PSP scores)

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Fig. 21
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DEA results (Model 4) 2009–2013 Model 4—1 Input (Normalized Education Expenditure), 1 Output (Education PSP scores)

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Fig. 22
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DEA results (Model 5) 2009–2013 Model 5—1 Input (Normalized Health Expenditure), 1 Output (Health PSP scores)

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Fig. 23
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DEA results (Model 6) 2009–2013 Model 6—1 Input (Public Investment), 1 Output (Infrastructure PSP scores)

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Fig. 24
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DEA results (Model 2) excluding Switzerland 2009–2013 Model 2—1 Input (Normalized Total Spending), 2 Output (Opportunity and Musgravian PSP scores)

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Fig. 25
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DEA results (Model 3) excluding Switzerland 2009–2013 Model 3—1 Input (Normalized Government Consumption), 1 Output (Administration PSP scores)

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Fig. 26
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DEA results (Model 4) excluding Switzerland 2009–2013 Model 4—1 Input (Normalized Education Expenditure), 1 Output (Education PSP scores)

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Fig. 27
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DEA results (Model 5) excluding Switzerland 2009–2013 Model 5—1 Input (Normalized Health Expenditure), 1 Output (Health PSP scores)

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Fig. 28
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DEA results (Model 6) excluding Switzerland 2009–2013 Model 6—1 Input (Public Investment), 1 Output (Infrastructure PSP scores)

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Fig. 29
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Public Sector Efficiency (PSE) Indicators excluding Switzerland, 2009–2013

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Fig. 30
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Summary results of different DEA models excluding Switzerland

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Fig. 31
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Production Possibility Frontier (Model 2)

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Fig. 32
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Production Possibility Frontier (Model 2) excluding Switzerland

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Afonso, A., Kazemi, M. (2017). Assessing Public Spending Efficiency in 20 OECD Countries. In: Bökemeier, B., Greiner, A. (eds) Inequality and Finance in Macrodynamics. Dynamic Modeling and Econometrics in Economics and Finance, vol 23. Springer, Cham. https://doi.org/10.1007/978-3-319-54690-2_2

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