Efficiency of Public Spending in Education, Health, and Infrastructure : An International Benchmarking Exercise
Governments of developing countries typically spend between 20 and 30 percent of gross domestic product. Hence, small changes in the efficiency of public spending could have a major impact on aggregate productivity growth and gross domestic product...
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| Language: | English |
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World Bank, Washington, DC
2018
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| Online Access: | http://documents.worldbank.org/curated/en/307361536864553619/Efficiency-of-Public-Spending-in-Education-Health-and-Infrastructure-An-International-Benchmarking-Exercise http://hdl.handle.net/10986/30431 |
| Summary: | Governments of developing countries
typically spend between 20 and 30 percent of gross domestic
product. Hence, small changes in the efficiency of public
spending could have a major impact on aggregate productivity
growth and gross domestic product levels. Therefore,
measuring efficiency and comparing input-output combinations
of different decision-making units becomes a central
challenge. This paper gauges efficiency as the distance
between observed input-output combinations and an efficiency
frontier estimated by means of the Free Disposal Hull and
Data Envelopment Analysis techniques. Input-inefficiency
(excess input consumption to achieve a level of output) and
output-inefficiency (output shortfall for a given level of
inputs) are scored in a sample of 175 countries using data
from 2006-16 on education, health, and infrastructure. The
paper verifies empirical regularities of the cross-country
variation in efficiency, showing a negative association
between efficiency and spending levels and the ratio of
public-to-private financing of the service provision. Other
variables, such as inequality, urbanization, and aid
dependency, show mixed results. The efficiency of capital
spending is correlated with the quality of governance
indicators, especially regulatory quality (positively) and
perception of corruption (negatively). Although no causality
may be inferred from this exercise, it points at different
factors to understand why some countries might need more
resources than others to achieve similar education, health,
and infrastructure outcomes. |
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