Public Sector Efficiency: An International Comparison Author(s): Antnio Afonso, Ludger Schuknecht and Vito Tanzi Source: Public

Choice, Vol. 123, No. 3/4 (Jun., 2005), pp. 321-347 Published by: Springer Stable URL: http://www.jstor.org/stable/30026689 . Accessed: 20/06/2013 14:35
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Public Choice (2005) 123: 321-347 DOI: 10.1007/s

d Springer2005

Public sector efficiency: An international comparison

LUDGER SCHUKNECHT1,* & ANTONIOAFONSO1'2,
VITO TANZIz
29, D-60311 Frankfurt am Main, Germany;LISEG/UTL 'EuropeanCentralBank, Kaiserstraf3e TechnicalUniversityof Lisbon, CISEP-Research Centreon the PortugueseEconomy,R. Miguel Ltipi20, D.C. U.S.A. 1249-078 Lisbon, Portugal; 3Inter-American DevelopmentBank, Washington, (*Author for correspondence:E-mail: ludgerschuknecht@ecb.int) Accepted 9 February 2004

Abstract. We compute public sector performance(PSP) and public sector efficiency (PSE) indicators,comprisinga composite and seven sub-indicators,for 23 industrialisedcountries. are "opportunity" indicatorsthattake into accountadministrative, The firstfour sub-indicators andthatsupportthe rule educationandhealthoutcomes andthe qualityof public infrastructure of law anda level playing-fieldin a marketeconomy.Threeotherindicatorsreflectthe standard tasks for government:allocation, distributionand stabilisation.The input and "Musgravian" output efficiency of public sectors across countries is then measured via a non-parametric productionfrontiertechnique.The study finds significantdifferencesin PSP and PSE, which suggests a large potentialfor expendituresavings in many countries.

Numbers:C14,H50. JEL Classification

Introduction
The debateon the role of the statehas shiftedin recentyears towardsempirical assessmentsof the efficiency and usefulness of public sector activities. A growing academic literaturehas been investigatingthe stabilisation,allocation and distribution effects of public expenditure.It has also been assessing the role of rules and institutionsand the scope for privatisingpublic sector activities (see e.g., Gwartneyet al., 2002; Mueller, 1997; Persson& Tabellini, 2001; Rodrik,2000; Shleifer & Vishny, 1998; Strauch& Von Hagen, 2000; Tanzi & Schuknecht,1997, 2000). Most studies conclude that public spending could be much smaller and more efficient than today. However, for this to happen,governmentsshould adopt better institutionsand should transfer many non-core activities to the privatesector. The measurement of public sector performance[PSP (defined as the outcome of public sector activities)] and public sector efficiency [PSE, (defined as the outcomerelativeto the resourcesemployed)],however,is still very limited. The objectiveof this paperis to provide a proxy for measuringPSP and PSE. To do this we will puttogethera numberof performance indicatorsin the core functions. These include the functions defined government's summary by Musgrave(allocation,distribution,stabilisation)and a numberof specific

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322 indicatorsthatreflect the rule of law and promoteequality of opportunityin the marketplace. Economic philosophersfrom Adam Smith to Hayek and Buchananhave stressedthe importanceof rules of law in promoting"good" governmentand the "wealthof nations".Naturallythey assumethatthe rules are "good"rules. We will set these indicators in relation to the costs of achieving them. We will, hence, derivesimple performance and efficiency indicatorsfor 1990 and 2000 for the public sectors of 23 industrialisedOECD countries. The index is thenalso used in a FreeDisposableHull (FDH) analysis, performance a rarely used non-parametric productionfrontiertechnique to estimate the extent of slack in governmentexpenditures. but also tax andreguNote, however,thatit is not only public expenditure that affect the of the sector. While expenditure latorypolicies efficiency public is also a relativelygood proxy of the tax burden,we ignore the composition of tax revenueand othercharacteristics of tax systems.1Public spendingmay be closely relatedto regulationbecause largecivil services, thatoften accompany large public spending, are likely to generatemuch regulationand vice versa. The paperis organisedas follows. In the next two sectionson "publicsector performanceindicators"and public sector expenditureefficiency analysis", we discuss and compute the PSP and PSE indicators. The fourth section extends the efficiency analysis with the help of an FDH analysis and the fifth section provides conclusions. Public Sector Performance Indicators Methodologyand data The studylooks at 23 OECDcountriesfor which we compileddataon various public expenditurecategories and socio-economic variables, reflecting the of governmentpolicies.3 effects/outputs/outcomes Assume that PSP depends on the values of certain economic and social indicators(I). If thereare i countriesandj areasof government performance, which together determine overall performancein country i, PSPi, we can then write
n

PSPi = LPSPij,
j=1

(1)

with

Therefore, an improvementin PSP depends on an improvementin the values of the relevantsocio-economic indicators:
APSPijlJ=Ei=k AIk. &Ik (2)

PSPi/

= f(Ik).

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323 The greaterthe positive effect of public expenditureon any of the selected sub-indicators,the greater will be the envisaged improvementin the PSP indicator.Accordingly, the changes that might occur in the economic and social indicatorsmay be seen as changes in PSP. As a firststep, we define seven sub-indicators of public performance. The first four look at administrative, education,health, and public infrastructure outcomes. A good public administration, with a well-functioningjudiciary and a healthy and well-educatedpopulation,could be considereda prerequisite for a level playing field with well-functioningmarketsand secure property rights, where the rule of law applies, and opportunitiesare plenty and in principleaccessible to all. High-qualitypublic infrastructure is conducive to attainingthe same objectives. These indicators,thereby,try to reflect the quality of the interactionbetween fiscal policies and the marketprocess and the influenceon individualopportunities this has. They could be called "process" or "opportunity" indicators. We adopt the latter terminology in the following. The three other sub-indicators reflect the "Musgravian" tasks for government. These try to measurethe outcomes of the interactionwith andreactions to the marketprocess by government.Income distribution is measuredby the firstof these indicators.An economic stabilityindicatorillustratesthe achievementof the stabilisationobjective.The thirdindicatortriesto assess allocative efficiency by economic performance.The conceptualseparationis of course somewhatartificial,as for examplehealthandeducationindicatorscould also be seen as indicatorsof allocative efficiency. Finally, all sub-indicatorsare put togetherin a PSP indicator. Before showingthe result,it is worthwhileillustrating how we derivethese indicators.Figure 1 shows the socio-economic indices on which performance governmenthas a significantif not exclusive influence and which, therefore, reflect as close as possible the outcomes of public policies (Annex Tables A and B provideprimarydata). These indices form the seven sub-indicators mentionedabove. In as much as possible we providedata for 1990 and 2000 (or the nearest available year), and in some instances, 10-year averages. This is because we are not so much interestedin annual fluctuationsbut in structural changes in PSP. Many indices reflect "stocks"which change only very slowly over time so that observationsevery 10 years suffice to reflect such structural changes. A case in point is for example per capita GDP and school enrolment.Otherindices, such as inflationor GDP growth, secondary vary stronglyand a 10-yearaverageseems the best way to capturelong-term trendsand structural changes.4 The choice of the socio-economic indices, that form the seven subfurtherdiscussion. In this context, it is also worthstressindicators,warrants ing thatthe degree of suitabilityof the indicatorsin proxyingthe outcome of public sector activityis not homogeneous.Their selection from a vast pool of

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324
indicators Opportunity Corruption Standard indicators "Musgravian" Distribution Incomeshare of 40%poorest households SStabilityof GDP growth (coeff. of variation Administrative Qualityof judiciary Shadow economy Secondary school enrolment Education Education achievement Infantmortality Health Life expectancy Qualitycommunication& infrast. transport Public Infrastruc -ture Totalpublic sector performance Unemployment 10 yearsaverage) Economic performance Stability Inflation(10 years average) GDPper capita (PPP) GDP growth(10 yearsaverage)

Red tape

Figure 1. Totalpublic sector performance(PSP) indicator.

variablesreflectsourbest attempt(see AnnexTableD for a completeoverview of indices and sources). As to the "opportunity administrative of governindicators", performance mentis measuredas a compositeof the following indices:corruption, redtape (concerningthe regulatoryenvironment), qualityof thejudiciary(concerning the confidence in the administration of justice) and the size of the shadow the level playing field by being untaxedand economy (which is undermining These variablesstandfor securityof propertyrights,rule of law, unregulated). enforceabilityof contractsanda level fiscal andregulatory playingfield. Data for corruption, redtapeandefficientjudiciarycome fromthe WorldEconomic Forum. The informationon the size of the shadow economy is taken from Schneider(2002), thatuses a currencydemandapproachin its computations. The education indicator contains secondary school enrolment and the OECDeducationalattainment indicatorsin orderto measureboththe quantity

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325 andqualityof education.Secondaryschool enrolmentproxiesminimaleducation standards thatneed to be attainedto have equalopportunities in industrial countries.Educationattainment is a more mixed indicatorof opportunity (the education the standards less the need for higher likely supplementary private education,which only the well-off can afford)and efficiency (as a proxy for a country'shumancapitalbase). Forthis indicator,we use datafromthe OECD survey on test scores in reading,mathematicsand science [OECD (2001c)] PISA report. The health performanceindicatorcontains infant mortality and life expectancy.These are well-known indicatorsthat reflect high-qualityand also relativelyequal access to health services across the population.Basic health, in turn, is a prerequisitefor equal opportunityin the marketprocess. The indicatorcontainsa measureof the communicationsand public infrastructure infrastructure transport quality.It is a mixed indicatorthat measuresopportunity (in the absence of roads only the rich can affordhelicopters or plane indicatorproxies the provision of rides) and efficiency (as this infrastructure All these indicators public goods). change slowly so that observationsevery 10 yearsprovidea good impressionof changes over time. An exceptionis the case of public infrastructure, where period averageshave been used (for lack of more frequentdata). As to the standard"Musgravian", general indicatorsless explanationis needed as the underlyingindicatorsare well-establishedin the economic literature.Income distributionis proxied by the income share of the poorest 40% of the households. Economic stability is measuredby the stability of outputgrowth (coefficient of variation)and average inflation (10-year average). Economic performancecomprises per-capitaGDP (PPP), GDP growth (10-year average)and unemployment(10-year average).The total PSP indicatorcombines the seven sub-indicators. Note that some indices also capture the effect of regulation ratherthan expenditurepolicies and some indices are only partly the result of governmentpolicies (for example, privateprovision and financingof health and educationplay an importantrole in some countries). Computation of the performanceindex We compile the performance indicatorsfrom the variousindices giving equal to each of them.For example,red tape, efficiency of thejudiciary,corweight ruptionand size of the shadoweconomy, each contribute25%to the administrativeperformance indicator.This of course introducesa strongassumption. For those indicators,where higher numbersare less favourable(e.g., infant mortality,inflation),we use the inverse of the original values. In orderto facilitate the compilation,we normalisedthe values and set the averagefor all indices equal to 1. The values for each countryare then recalculatedrelative

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326 to the average.Table 1 presentstheresults for the constructedPSP indicators for the year 2000. Indicators suggestnotablebutnotextremelylargedifferencesin PSP across countries(with a few exceptions). Countrieswith the highest values for subindicatorsinclude Switzerland(administration andinfrastructure), Japan(education),Iceland(health),Austria(distribution), Norway(economic stability) and Luxembourg(economic performance).Countriessuch as Luxembourg, Japan, Norway, Austria and the Netherlandsreporthigh total PSP indicators. The latter is true both for a PSP indicatorwith equal weights for the sub-indicatorsand for different weighting, suggesting that the findings are relativelyrobustto moderatechanges in weighting. Looking at country groups, small governments(industrialisedcountries with public spending below 40% of GDP in 2000) on balance reportbetter economic performancethan big governments(public spending above 50% of GDP) or medium sized governments(spending between 40 and 50% of featuremoreeven income distribution, whereassmall GDP). Big governments better in the administrative,stability and governments perform especially economic performance domains.These resultsareconsistentwith those found in Tanzi and Schuknecht(2000). When comparingthe main economic "players"of today, it is noteworthy that the United States and particularlyJapanreport above-averageperformance in most sub-indicesandfor the total PSP measure.By contrast,the EU (weighted average)performsbelow average. Taking advantageof the data set available, we performeda comparison between the PSP for 2000 and for 1990, in order to assess how PSP has changed over time6 and the results are presentedin Figure2. One can easily see thatwhile some countriesmanagedto delivera relative improvementin PSP (all the countries located above and to the left of the diagonal line), some other countries showed a decrease in PSP (countries below and to right of the diagonal). Examples of the first group of countries are Greece, Portugal, Spain and Ireland.However, only Ireland succeeded in placing itself above the average of the 23 OECD country sample. Some countries experiencedreductionsin PSP. Especially, Japanand Switzerland fall in 2000 comparedto 1990. This is also truefor the saw theirperformance EU and the euro areaas a whole. However,one shouldbe awarethatprogress in PSP madeby the differentcountriesover time is measuredrelativeto other countriesand not relativeto its own past performance. Public Sector Expenditure Efficiency Analysis Methodology Public expenditure, expressedas a shareof GDP,canbe assumedto reflectthe costs of opportunity achievingthe PSP estimatedin the previoussection.7In

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327

page) weightsa) performance public 1.21 1.11 1.13 1.03 1.05 1.14 1.06 1.01 1.04 1.12 1.02 0.93 0.80 0.89 0.83 0.93 0.96 0.78 sector (equal Total 0.95 (Continued next on

1.40 1.18 1.06 1.26 1.29 1.00 1.01 2.04 0.69 0.84 0.92 0.67 0.70 0.81 0.69 0.83 0.92 0.91 0.73 performance Economic indicators 1.40 1.42 1.45 1.22 1.22 1.28 1.10 1.00 1.10 1.12 1.31 Stability 0.59 0.76 0.99 0.64 0.82 0.75 0.91 0.55 "Musgravian"

1.19 1.22 1.17 1.18 Standard 0.87 0.92 0.90 0.98 0.97 Distribution

1.10 1.20 0.89

1.00 1.17 1.02 0.62 0.92

1.10 1.00 1.16 1.03 Infrastructure 0.91

1.01 1.01 0.81

1.00 1.09 0.84

1.09

0.94 0.75 0.86

(2000)

1.03 1.04 1.03 1.01 1.25 1.12 1.09 1.10 Health 0.94 0.98 0.94 0.95 0.93 0.88 0.93 0.95 0.97 0.89 0.90

indicators (PSP) 1.02 1.00 1.00 1.05 1.00 1.07 1.03 1.09 1.04 1.03 1.04 1.00 Education 0.98 0.94 0.98 0.94 0.96 0.81 0.94

indicators performance 1.17 1.21 1.11 1.16 1.26 1.02 1.02 1.06 1.05 1.16 1.18 Opportunity Administration 0.73 0.72 0.60 0.52 0.87 0.97 0.54 0.77 sector Public 1. Table

Zealand Country Australia Austria Belgium Canada Denmark Germany Greece Finland France Iceland Ireland Italy Spain Japan Luxembourg Netherlands Portugal New Norway

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328

40%< weightsa) performance public public 1.010.94 1.07 1.021.00 1.07 1.04 0.93 0.97 0.91 sector (equal Total Total governments:

medium 1.03 1.17 1.201.00 1.09 0.78 0.850.80 0.84 0.91 performance Economic indicators 1.030.93 1.17 1.141.00 0.96 0.89 0.78 0.79 Stability 0.69 "Musgravian" GDP of >50% 2000, in

1.00 1.120.98 1.17 0.92 0.94 0.79 0.761.00 0.95 Standard Distribution

spending public group.

1.010.98 1.08 1.081.00 1.23 0.97 1.10 0.93 0.99 Infrastructure

relevant the governments: in big GDP 1.00 1.010.99 1.00 1.14 1.19 0.98 0.821.00 0.91 Health 2000, in country GDP each of 1.021.00 1.01 1.05 1.001.00 0.99 1.07 0.98 0.97 Education indicator. of

indicators

<40% total share to 2000. 1/7 in the to spending GDP 1.11 1.150.99 1.32 1.00 0.84 1.16 0.990.88 0.93 Administration Opportunity of public according contributes <50% averages governments governments: States governmentsb Kingdom spending areacsub-indicator governments 15c cWeighted public bSmall Small Big EU Euro aEach Medium Average Switzerland United Sweden United Country

(Continued) 1. Table

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329
1.50

Improvement

(+)
1.25

Luxembourg
Ireland.

Japan

1.00-

Switzerlan,

Spain
0 0.75

Portugal Greece

Os
EGro Italy

0.50

Worsening
0.25 . 0.25 0.50 0.75 1.00 1.25

(-)

1.50

1990 Figure 2. Public sector performance:1990 and 2000.

additionto totalpublic spending,we looked at averagespendingon goods and services, transfers,functional spending on education and health and public investment.Data for 1990 and 2000 for these categories across countriesare reportedin Annex Table C. Public expendituresdiffer considerably across countries. Average total spending in the 1990s ranged from around35% of GDP in the United Statesto 64%of GDP in Sweden. The differenceis mainly due to moreor less extensivewelfareprograms.Public spendingon healthand educationandon goods andservicesdiffermuchless stronglyacrosscountries. Based on the framework of Equations(1) and (2), we now computeindicatorsof PSE. We weigh performance (as measuredby the PSP indicators)by the amountof relevantpublic expenditure(PEX), that is used to achieve a given performancelevel. The overall PSE indicatorfor any countryi, is given by:
PSPi PSEi PEXi , (3)

with
PSPi
n

PSPij

PEXi PEX- I=PEXi) Positive but declining marginalproductivityof PEX would imply:
aPSEij

(4)

aPEXij

> 0, _2PSEi0 < 0. aPEX(

(5)

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330 In orderto computeefficiency indicators,public spendingwas normalised across countries,with the averagetaking the value of one for each of the six categoriesspecified above. We focus on averageexpenditureover the 1990s, as we would assume a lagged effect from spending on performance.For example, public spendingon educationover the previousdecade, is assumed to affect educationalachievementin 2000. of the efficiencyindex Computation Before putting PSP and expendituretogether,it is worth stressing that not all expenditurecategories are equally suitable indices for measuringthe efficiency with which a certainperformanceis achieved. Goods and services for what is needed to achieve adspending are a rathercrude approximation ministrativeefficiency.Health and educationspendingseem bettermeasures of the public sector inputsin these domains. Notice however,thatit is not easy to accurately identifythe effects of public sector spendingon outcomes and separatethe impactof spendingfrom other influences.Forinstance,it is difficultto assess to what extent does higherlife thanotherfactorssuchas climate, rather expectancyreflectpublicintervention could be made regardinginfant dietaryhabits,and so on. The same argument On thatline of reasoning,adversegeographicalconditionsmay also mortality. impairon the quality and cost of a countrycommunicationsinfrastructure. for Transfers(social paymentsonly) areprobablysuitableapproximations governmentspending to promote income equality,and public investmentis likely to be closely connected with infrastructure quality.8Total spending stabilisation efforts because automatic be a useful for proxy government may stabilisersare largerin countrieswith "big governments" (see, Bouthevillain et al., 2001; Van den Noord, 2000). Total spendingis generally financedby distortivetaxation. It can, hence, be used as a proxy for the efficiency (or inefficiency) of the state in affecting economic performance. Before turningtoTable2, which reportsthe ratio of performanceand expenditureindices as so-called PSE indicators,it is worthwhilestressinga few caveats.Public spendingacrosscountriesis not always fully comparable even though much progresshas been achieved in this regard.For example, some countries' transferpayments are taxed, therebyoverstatingpublic spending comparedto countrieswhere such benefits are not taxed. Nevertheless,it is not possible to systematicallyassess and correct such problems.Moreover, comparingexpenditureratios across countries implicitly assumes that productioncosts for public services are proportionate to GDP per capita.While this approximationis likely to be quite good for labour intensive services (such as educationor administrative efficiency), it is likely to be less so for dataof differentpublic infrastructure quality.In the absenceof cross-country service sector costs, this is neverthelessthe best possible approximation.

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331

page) weightsb) efficiency public 1.29 1.06 1.01 1.03 sector (equal Total 1.27 0.96 0.84 0.81 1.40 1.38 0.96 0.97 1.05 0.80 1.02 0.85 0.95 0.86 0.95 next on

(Continued 1.27 Economic performance 0.87 0.73 0.94 1.44 1.73 0.73 0.60 1.52 0.61 0.78 0.68 1.19 0.61 2.15 0.98 0.94 0.98 0.72 indicators

1.66 1.11 1.02 Stability 0.98 1.51 0.88 0.62 0.97 1.80 1.28 0.88 0.54 1.32 1.10 0.65 1.36 0.68 0.68 0.88 "Musgravian"

1.53 Standard 1.16 Distribution 0.94 0.91 0.93 0.85 0.68 0.80 0.95

1.14 1.82 0.93

1.15 1.09 1.10 0.81 0.69

1.17 1.25 1.67 1.35 1.72 Infrastructure

1.29 0.94 0.71

1.16 1.00 0.56

1.24

0.83 0.57 0.70

(2000)a

1.04 1.04 1.05 Health 0.87 1.21 0.87 0.91 0.87 0.80

1.04 1.31 1.03 1.17 0.98 1.24 0.95 0.90 0.99

indicators 1.09 1.19 Education 1.14 0.97 0.85 1.91 0.70 1.01 0.82 1.18 0.97 1.67 1.26 1.10 0.97 1.19 0.82 0.73 0.98 (PSE) indicators efficiency 1.25 1.21 Opportunity 1.04 Administration 1.09 1.03 0.68 1.31 0.89 0.60 1.16 1.18 0.81 0.91 1.26 0.54 0.98 sector 0.90 0.57 0.86 Public 2. Table

Zealand Country Australia Austria Belgium Canada Denmark Finland France Germany Greece Ireland Iceland Italy Japan Luxembourg Netherlands New Norway Spain Portugal

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332

weightsb) efficiency public governments: 1.261.04 1.10 1.28 1.00 sector (equal Total 0.831.20 0.920.95 0.92 medium 2000, in GDP of >50% "Musgravian" 1. 1.021.02 1.36 Standard 0.871.28 0.87 0.97 0.870.85 Distribution 0.85 spending

1.621.05 1.49 1.08 0.671.32 Economic performance 0.96 0.730.77 0.74 indicators

1.531.03 1.49 Stability 0.500.96 0.89 0.93 0.880.88 0.90

Table publicgroup. of

relevant indicators the the governments: in of big GDP 1.05 1.02 1.031.00 0.960.94 0.93 0.98 0.841.01 Health 2000, in country GDP "counterparts" each of 1.11 1.10 1.061.06 1.10 1.15 0.961.09 0.760.94 Education indicator. of 2000. in total <40%share indicators weighted to GDP the 1/7 of to spending 1.02 1.481.01 1.38 0.82 expenditure 0.96 0.850.85 Opportunity 0.831.72 Administration <50% thecontributes public according are 1.04 1.281.24 1.10 1.151.16 1.85 1.241.14 1.06 Infrastructure spending averages

(Continued) 2. Table

governments indicators Kingdom States governmentsc governments: public aread sub-indicator governments 15d

Switzerland Small dWeighted Sweden Big EU Euro aThese CSmall Country bEach United United Average Medium 40%<

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333 Wefindsignificantdifferencesin PSE acrosscountries.Japan,Switzerland, Australia,the United States and Luxembourgshow the best values for overall efficiency. Looking at country groups, "small" governments post the countries.Differences are considerhighest efficiency amongstindustrialised able as "small"governmentson averagepost 40% higher scores than "big" governments.9 In summary,we find that differences in efficiency are much more pronounced than in performanceacross countries, with "small" governments the others.This illustratesthatthe size of governmentmay clearly outranking be too largein manyindustrialised countries,with decliningmarginal products being ratherprevalent.But given the non-extremedifferencesin performance as outlined above, the incidence of "negative"marginalproducts of public spendingmay be more limited.

Measuring Input and Output Efficiency Via an FDH Analysis TheFDH analysis In a final step, we use the informationfrom previous sections to measure the "wastefulness"of public spending across countries, i.e., the input and outputefficiency of expenditure.To this end, we apply a so-called FDH analysis, which is a non-parametric techniquethatwas firstproposedby Deprins, Simar,and Tulkens(1984).10In the FDH frameworkit is possible to rankthe with a proefficiencyof producersby comparingeach individualperformance ductionpossibility frontier.Along this productionpossibility frontierone can observe the highest possible level of output/outcomefor a given level of input. Conversely,it is possible to determinethe lowest level of inputnecessary to attaina given level of output/outcome.This allows identifying inefficient producersboth in terms of input efficiency and in terms of output/outcome efficiency. There are a few other studies that apply FDH analysis to assess public spending efficiency. Van den Eeckhaut,Tulkens, and Jamar(1993) studied the efficiency of public spending in Belgian municipalities, and Fakin and Crombrugghe(1997) assessed the efficiency of government expenditures as regardssome specific public services in OECD and CentralEurope countries. Gupta and Verhoeven (2001) use FDH analysis to measure the efficiency of government expenditure on education and health in a set of countries in Africa. Clements (2002) assesses the efficiency of education spending in the European Union. Aubyn (2002) reports results of FDH analysis applied to education and health spending in OECD countries, while Afonso and St. Aubyn (2003) apply both FDH and DEA to those two sectors. The FDH methodology can be well illustratedgraphically (Figure3).

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334
Y, indexof performance

D C

Y(A)=1O

Y(B)=5

X, spending

X(A)=100X(B)=150
Figure 3. Productionpossibility frontier.

Assume four countries,A, B, C and D thatuse a certainamountof public measuredon thehorizontalaxis in monetaryunits.The countries expenditures, are then assumedto achieve a certainlevel of public spendingperformance, measuredon the verticalaxis. The efficiency of the four countries is obviously different.For instance, country B uses more input than country A [X(B) > X(A)], but produces less output [Y(B) < Y(A)]. Therefore,countryB is relatively inefficient in comparison with country A. On the other hand, country A is efficient in relationto countryB, andit is placed on the "production possibility frontier". This means there are no other countries besides countryA that deliver the same level of outputwith a lower level of input. Similarly,countriesC and D are efficient and are also on the productionpossibility frontier.No other countryis inefficientcomparedto them.11 This frameworkallows the calculationof the "production possibility fronand and scores in order to rank the tier", input efficiency output efficiency sample countries in terms of public spending efficiency. These efficiency scores will be set between 0 and 1, and all the countries placed on the "productionpossibility frontier"will be assigned the maximum score of 1. Note that this approachis likely to underestimate inefficiencies, as the countries on the "production possibility frontier"are efficient by definition(even though they too may have scope for savings). The input efficiency score of a given countryindicates how much less input this countrycould use to achieve the same level of output. Additionally,the output efficiency score of a given country would tell how much more output the country should

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335 be able to produce with the same amount of resources that it is currently using.12 FDH-based expenditureefficiencyanalysis We now conduct an FDH efficiency analysis of public expenditureto our sample of 23 OECD countries. Public spending as a percentageof GDP in 2000 measures the input and as output we use the PSP indicator already determinedin the section on public sector performance.The "production for our set of countriesis presentedin Figure4.13 One can possibilityfrontier" see thatthe most efficientcountries,positionedon the "production possibility frontier",are the United States, Japan and Luxembourg.Australia, Ireland and Switzerlandcome very close to the frontier,while the othercountriesare furtherremovedand thereforeless "efficient". The figure shows that the EU countries are mostly well inside the productionpossibility frontier.They mostly reporta much higherratio of public expenditureratio than the United States, but neverthelessoften reportlower PSP indicators. The results both for input efficiency and output efficiency are presented in Table 3, wherewe reportthe respective efficiency scores along with each country'sranking. The Table shows that input efficiency scores startat 0.57 and outputefficiency scores at 0.65. The averageinput efficiency of the 15 EU countriesis 0.73 meaningthatthey shouldbe able to attainthe same level of outputusing only 73% of the inputsthey are currentlyusing (or about35% of GDP rather
1.50

1.25
o Q0. '-

Luxemrnbou Japan !witzerland Abstralia Germany Germany

Italy

Austria Sweden

1.00

US

'o,
0

0.75

Greece
"Production possibilityfrontier"

t 0.50 25 30 35 40 45 50 55 60 Total public expenditures/GDP (%) 4. Public Figure expenditureand public sector performance,23 OECD countries,2000.

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Table3. Efficiencyscores:Publicexpenditures as a %of GDP in 2000 andPublic Sector Performance indicator(see Table 1) Inputefficiency Country Australia Austria Belgium Canada Denmark Finland France Germany Greece Iceland Ireland Italy Japan Luxembourg Netherlands New Zealand Norway Portugal Spain Sweden Switzerland United Kingdom United States Average EU15 average Non-EU15 average Small governments1/ Medium governments1/ Big governments1/ EU 15 2/ Euro area 2/ Score 0.99 0.67 0.66 0.75 0.62 0.61 0.64 0.72 0.73 0.87 0.96 0.66 1.00 1.00 0.72 0.83 0.73 0.79 0.80 0.57 0.95 0.84 1.00 0.79 0.73 0.89 0.98 0.81 0.65 0.72 0.70 Rank 4 17 19 12 21 22 20 16 14 7 5 18 1 1 15 9 13 11 10 23 6 8 1 Outputefficiency Score 0.92 0.92 0.79 0.84 0.87 0.83 0.77 0.79 0.65 0.90 0.93 0.68 1.00 1.00 0.91 0.81 0.93 0.70 0.78 0.86 0.94 0.80 1.00 0.85 0.82 0.92 0.96 0.82 0.83 0.78 0.78 Rank 7 8 18 13 11 14 20 17 23 10 6 22 1 1 9 15 5 21 19 12 4 16 1

The values in bold signal the countries located on the productionpossibility frontier. aSee notes of Tables 1 and 2. bWeightedaveragesaccordingto the shareof each countryGDP in the relevant group.

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337 thanclose to 50%).The outputefficiency score implies thatwith given public expenditures,PSP is 82% (or 18%less) of what it could be if the EU was on the production possibilityfrontier(andmoreif the countrieson the production frontier also have scope for expendituresavings). By contrast,the possibility non-EUOECDcountriesreportmoreefficientpublicexpenditure. An average input efficiency score of 0.89 implies only roughly 11%"waste". It is also now possible to focus on some specific interestingcases, such as Sweden. It reportsa PSP indicatorof 1.04, above the averageof the country sample. High public spending pushes down the PSE indicatorto a value of only 0.82, well below the average.The inputefficiency score of 0.57 suggests that little more than half the currentspendingwould be sufficientto achieve the same PSP.The situationis similarin some of the othercountrieswith "big governments", namelyFrance,GermanyandItaly,wherepublic expenditures accountfor around50% of GDP.Indeed,with the exception of Luxembourg, all two othercountrieslocatedon or nearthe production possibilityfrontierbecountries,with a public expenditure long to the groupof "smallgovernment" ratiobelow the 40% threshold.

Conclusion
We developed indicatorsof public sector performance(PSP) and efficiency (PSE) for 23 industrialisedcountries. For that purpose we used a number of socio-economic indicators as proxies for performance,and total spending and a number of spending categories as proxies for resource use. We find moderatedifferences in the PSP indicatorsacross industrialisedcountries. Unsurprisingly,countries with small public sectors report the "best" economic performance,while countrieswith large public sectors show more equal income distribution. When weighing performanceby the resources used to achieve it, there are importantdifferences across countries in the resulting PSE indicators. Countrieswith small public sectorsreportsignificantlyhigherPSE indicators than countries with medium-sized or big public sectors. All these findings suggest diminishingmarginalproductsof higherpublic spending. The resultsthatwe get from the production-frontier-related FDH analysis, which uses the PSP indicators,are also in line with the aforementionedconclusions. Small governmentstendto show betterresults.Spendingby big governmentscould be, on average,about 35% lower to attainthe same PSP.The calculationsalso point out thatEU 15 countriesshow relativelylow efficiency when comparedwith the United Statesandalso the averageof the otherOECD countriesin the sample. EU 15 countriesare using 27% more public spending than the "most efficient"countries with similar PSP indicators. Spending for the averageof the other OECD countriesis "only" 11% higher than necessary.

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338 However, all these results have to be seen as indicative and need to be with greatcarefor the reasonsoutlinedabove.Particularly, one has interpreted to be awarethatit is not easy to accuratelyidentifythe effects of public sector spendingon outcomes and separatethe impactof public spendingfrom other influences.This notwithstanding, we use a largenumberof indices andthebest dataavailablethatis also appliedin the relevanteconomic andpolicy literature for cross countrycomparisonsto contain as much as possible this problem. In ourinterpretation, we mainly focussed on the overallPSP andPSE indicatorsto which we also appliedthe FDH analysis.This is appropriate to gain an overallimpression.The comparisonof the differentopportunity and standard sub-indicators across countriesand the detailedassessmentof "Musgravian" differencesmay providefurtherand more specific insights and lessons. It is also important to bearin mindthatby using a non-parametric approach, and in spite of FDH being an establishedand valid methodology,differences across countries are not statistically assessed. This can be considered as a limitationof such methodology. Acknowledgements We are gratefulto Carlos Barros,Marc Coleman, Juergenvon Hagen, Jos6 Marin, PierrePestieau, Philipp Rother,Miguel St. Aubyn, Rolf Strauch,an at the ZEIWorkshop, anonymousrefereeandparticipants Universityof Bonn, at the 2003 European PublicChoice Society conferencein Aarhus,at the 2003 FrenchEconomics Asociation conferencein Lille, for helpful comments and GerhardSchwab for valuable researchassistance. Any remainingerrorsare the responsibilityof the authorsThe opinions expressed herein are those of the authorsand do not necessarilyreflectthose of the author'semployers. Notes
1. For example, tax collection may impose significantwelfare and compliancecosts on taxpayers. 2. However,Brennan(2000) and Tanzi (1998) have arguedthatregulationsand tax expenditurescan also become a substituteof public spending,andtherebyarenegativelycorrelated with the size of the public sector as measuredby the level of public spending. 3. One should be aware of the distinction between output and outcome. The number of hospitaldays per 1000 people is an outputbut full recoveryfrom illness or life expectancy is an outcome. Even though we try to approximateoutcomes ratherthan output(e.g. red tape, life expectancy) the distinctionis not always possible and we use both terms in an interchangeable way. 4. There are few instances where actual and trend growth deviate by 0.4/0.5% for the 10year averages.However,when using trendratherthan actualgrowthin the calculationof indices, results change very little even for the economic performanceindicator. 5. For example, giving alternativeweights to the sub-indicatorsdoes not change much the results in most cases. In the Appendix (TableAl) we presentthe results with alternative for PSP indicatorswith the testedchangesin weights weightingschemes.Rankcorrelations

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339
and are in the (0.95-0.99) range. This weigthing of the variablesis quite straightforward economically intuitive (even though it is still somewhatad hoc). It avoids the problemof lack of economic justification of a more complex statistical approachsuch as principal componentanalysis thatmight come to mind in this context. One shouldbearin mindthatdataarenot fully comparable. E.g., some dataarenot available for some countries.For example the OECD PISA reporton educationachievementonly covers 2000. Proceedsfrom the sale of UMTS mobile telephonelicences have been excluded fromtotal decline in expenditure. expendituresince they were recordedas a temporary Income distribution and stabilisationis also affectedby the progressivityof the tax system, but this effect is very difficultto assess due to the lack of comparableand detailedenough data. The PSE indicators are also quite robust to different weightings as can be seen in the Appendix (TableA2). For an overview of the FDH analysis see for instance Tulkens (1993). Another nonparametricapproachthat might be used to assess public expenditureefficiency would be Data EnvelopmentAnalysis (DEA). This technique, developed by Charnes,Cooper and Rhodes (1978), implies a convex productionfrontier,a hypothesis thatis not required in the FDH approach. Foran overviewof non-parametric see for instanceSimar approaches and Wilson (2003). effiGuptaand Verhoeven(2001) would call countries such as C and D "independently cient", and countryA "notindependentlyefficient." Figure 3 illustratesthat countryB's input efficiency score is given by X(A)/X(B), which is 0.5, smallerthan one, since B is the interiorof the productionpossibility frontier.This implies thatthe excess use of inputsby inefficientcountryB is 50 per cent of the necessary of countryA. CountryB's outputefficiency inputsto achievethe samelevel of performance score is Y(B)/Y(A). In this case, the loss of outputof countryB relativeto the most efficient countryturnsout to be also 50 per cent (since for countryB one can calculateY(B)/Y(A) = 5/10 = 0.5). The production possibility frontierfor the examplein Figure3 is as follows: 0, X < 100 (X)= Y(C),
Y(D),

6.

7. 8.

9. 10.

11. 12.

10, 100 < X < X(C) X(C) X < X(D)

< X > X(D)

13. Note that the term productionpossibility frontier is somewhat misleading, as the true is unknown.One must also be awareof the scaling when interpreting "frontier" the chart. A doublingin PSP is not necessarily a doubling of welfare or utility.

Appendix In order to assess the sensitivity of the results for PSP and PSE, we used alternative weightingschemes.We computedPSP andPSE indicatorsthatcan more give weight to, inter alia, opportunity, equality,stability and economic performancesub-indicators.One could argue that these indicatorsemulate people with differentintensitiesof preferences.The results,presentedin Table Al andin TableA2, confirmthatthe conclusionspresentedin the maintext are generally not changed. Rank correlationswith the tested changes in weights are in the (0.95 0.99) rangefor PSP indicatorsandin the (0.96 0.99) rangefor PSE indicators.

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TableAl. Totalpublic sector performance(PSP), 2000, differentweights with emphasison: Weightingof sub-indicators Country Australia Austria Belgium Canada Denmark Finland France Economic Baselinea Opportunityb Equalityc Stabilityd performancee 1.04 1.12 1.04 1.11 0.94 1.03 1.06 1.05 0.93 0.97 0.79 1.04 1.04 0.83 1.12 1.17 1.10 0.96 1.11 0.80 0.90 1.06 1.09 0.93 1.02 1.00 1.06 0.97 1.01 0.94 0.94 1.01 1.14 1.00 1.00 1.09 1.04 0.92 0.96 0.82 1.03 1.02 0.89 1.15 1.21 1.08 0.86 1.14 0.83 0.92 1.07 1.04 0.88 0.96 1.00 1.04 0.97 1.03 0.95 0.95 1.10 1.15 0.99 1.01 1.07 0.96 0.97 0.95 0.73 0.95 1.09 0.81 1.20 1.22 1.18 0.94 1.20 0.76 0.87 0.96 1.01 0.88 1.05 1.00 1.09 0.95 1.01 0.93 0.94 1.03 1.09 0.93 1.00 1.03 0.95 0.88 0.92 0.76 1.07 1.13 0.80 1.15 1.35 1.09 0.91 1.16 0.83 0.84 1.01 1.07 0.89 1.06 1.00 1.09 0.97 0.97 0.91 0.90

0.95 1.02 1.06 1.01 0.93 0.96 Germany Greece 0.78 Iceland 1.03 Ireland 1.05 0.83 Italy 1.14 Japan 1.21 Luxembourg 1.11 Netherlands New Zealand 0.93 1.13 Norway 0.80 Portugal 0.89 Spain Sweden 1.04 Switzerland 1.07 United Kingdom 0.91 United States 1.02 1.00 Average 1.07 Small governments Medium governments 0.97 1.01 Big governments EU 15" 0.94 Euro area* 0.93

(1/7), as in Table 1. aEqualweights assigned to each sub-indicator indicators".This means b2/3 assigned to opportunityindicatorsand 1/3 to "Musgravian 1/6 assigned to each of the four opportunityindicators and 1/9 to each of the three indicators". "Musgravian c1/3 assigned to the distribution indicatorand 2/3 to the otherindicators.This means that each of the other six indicatorswill have a weight of 1/9. d1/3 assigned to the stability indicatorand 2/3 to the other indicators.This means that each of the other six indicatorswill have a weight of 1/9. e 1/3 assigned to the economic performance indicatorand 2/3 to the other indicators.This means thateach of the othersix indicatorswill have a weight of 1/9. *Weightedaveragesaccordingto the shareof each countryGDP in the relevantgroup.

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TableA2. Totalpublic sector efficiency (PSE), 2000, differentweights with emphasis on: Weightingof sub-indicators Country Australia Austria Belgium Canada Denmark Finland France Germany Greece Iceland Ireland Economic Baselinea Opportunityb Equalityc Stabilityd performancee 1.29 1.06 1.01 1.03 0.96 0.84 0.81 1.25 1.07 1.03 1.03 0.98 0.89 0.81 0.98 1.01 0.77 1.24 0.86 1.35 1.34 1.06 0.96 0.99 0.85 0.96 0.85 1.20 1.13 1.23 1.04 1.26 1.00 0.94 0.96 0.93 1.34 1.03 0.98 1.06 0.96 0.84 0.78 0.92 0.97 0.80 1.24 0.86 1.50 1.38 1.00 0.90 1.05 0.91 0.99 0.84 1.22 1.05 1.20 1.04 1.30 1.00 0.91 0.93 0.90 1.37 1.07 1.00 1.03 0.94 0.80 0.84 0.94 0.88 0.77 1.32 0.81 1.49 1.37 1.11 0.98 1.10 0.82 0.94 0.76 1.14 1.05 1.32 1.04 1.33 0.99 0.92 0.93 0.91 1.28 1.02 0.95 1.01 0.91 0.79 0.76 0.92 0.91 0.90 1.37 0.79 1.43 1.51 1.04 0.95 1.06 0.89 0.90 0.79 1.23 1.07 1.34 1.04 1.33 1.01 0.88 0.91 0.88

0.96 0.97 0.80 1.27 0.85 Italy 1.40 Japan 1.38 Luxembourg Netherlands 1.05 New Zealand 0.95 1.02 Norway 0.86 Portugal 0.95 Spain Sweden 0.83 Switzerland 1.20 United Kingdom 1.10 United States 1.26 1.04 Average Small govs. 1.28 Medium govs. 1.00 0.92 Big govs. EU 15*" 0.95 Euro area* 0.92

aEqualweights assigned to each sub-indicator(1/7), as in Table 2. b2/3 assigned to opportunityindicators and 1/3 to "Musgravianindicators".This means 1/6 assigned to each of the four opportunityindicatorsand 1/9 to each of the three "Musgravian indicators". c1/3 assigned to the distribution indicatorand 2/3 to the other indicators.This means thateach of the other six indicatorswill have a weight of 1/9. d 1/3 assigned to the stabilityindicatorand 2/3 to the otherindicators.This means that each of the other six indicatorswill have a weight of 1/9. e 1/3 assigned to the economic performanceindicatorand 2/3 to the other indicators. This means thateach of the other six indicatorswill have a weight of 1/9. *Weighted averagesaccordingto the shareof each countryGDP in the relevantgroup.

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quality 1990-95 3.0 3.3 2.7 3.5 3.1 Communication transports 3.5 Public and 1980-89 2.8 3.1 3.1

3.0 3.0 2.4

3.0 2.5 3.3

3.3

2.8 2.2 2.6 3.3 3.7 3.0 3.3

3.0

2.8 3.4 2.6

2.8 2.3 3.5

3.4

3.2 2.0 2.3 3.3 3.6 2.9 3.8

3.0

80.7 75.6 77.1 78.1 78.2 78.9 76.4 77.5 77.4 77.9 79.5 76.3 77.0 77.9 78.2 78.6 78.2 79.6 79.7 77.3 2000 78.9 78.2 78.9 78.7 1990 78.8 80.6 75.4 77.9 76.9 76.2 78.0 79.0 75.9 77.0 77.9 79.2 76.9 77.7 77.4 78.5 79.3 79.6 77.2 77.9 77.3 78.5 76.1 78.3 Life expectancy 2000 5.3 4.8 5.3 5.2 4.3 4.2 4.4 4.5 5.4 3.1 5.9 5.3 3.8 5.0 4.9 5.9 3.9 5.5 3.9 3.4 3.7 5.6 7.1 1990 Infant mortality 8.0 7.8 7.9 6.8 7.5 5.6 7.3 7.0 9.7 5.9 8.2 8.2 4.6 7.3 7.1 8.3 6.9 10.9 7.6 6.0 6.8 7.9 9.4 4.8 7.5 age. school official 1995 519 achievement Education 550521 491581 529501 498492 520.2

2000 530514508532497540507487460506514473543 436

531501 506528499 518.2 456487513

1998 88.9 83.1 87.6 89.5 87.8 86.4 85.4 88.3 91.6 88.2 88.0 67.6 92.6 90.3 96.4 99.5 93.7 90.2 89.3 94.8 94.2 77.0 98.6 93.7 corresponding 1990 78.6 85.0 87.7 86.8 85.8 82.7 79.9 96.8 83.6 87.7 88.7 School 93.0 enrolmentc 91.1 85.3 85.8 85.7 79.8 79.1 the of

8.6 12.7 8.7 9.8 16.0 12.8 19.1 19.2 11.2 13.1 14.3 18.1 15.2 16.0 1999/2000 22.7 22.7 27.1 28.7 15.9 22.2 18.0

16.7

population the to

8.8 6.9 19.3 9.0 11.8 1989/90 10.1 12.8 10.8 13.4 22.6 11.0 22.8 Shadow economyb of

6.7 9.6 6.7 9.2 14.8 16.1 15.8 11.9 15.9

12.7 school, in

8.26 8.30 8.52 8.02 8.28 2.70 8.70 8.23 8.28 3.56 7.40 7.07 7.2 8.49 8.59 5.85 7.57 6.25 7.47 4.43 5.70 6.15 2001 8.51 9.04 enrolled

1990 7.84 8.70 8.20 8.03 3.16 8.13 7.06 7.51 8.42 8.17 7.89 2.89 7.61 7.1 8.44 8.42 6.20 5.00 8.09 7.76 6.18 6.18 Quality 7.33 judiciarya 1.76 1.97 3.14 3.73 4.0 3.03 3.97 5.36 2.22 5.58 3.87 5.64 2.62 5.04 6.38 2.34 6.28 4.11 4.69 4.34 2001 4.94 2.78 4.12 4.63 tapea 1.90 3.76 5.46 4.09 4.81 Red 1990 4.13 4.86 4.59 4.74 indicators 5.97 3.32 3.18 6.11 5.31 4.5 3.76 5.42 6.27 5.30 2.76 5.32 4.00 4.63

age school official of

8.76 8.07 3.89 8.61 6.83 6.55 6.7 3.53 7.97 5.57 7.16 3.00 5.54 7.37 5.22 9.53 6.91 9.03 4.27 2001 8.21 6.92 7.78 9.03 4.22

sources 1990 6.57 5.24 5.52 7.79 6.03 7.58 2.82 7.50 9.16 Corruptiona Opportunity and A. Table

8.43 8.00 8.13 3.78 7.63 7.89 6.53 6.4 7.35 6.98 2.56 5.46 5.52 4.51

children of GDP. of number the 1-10. of percentage

Kingdom States Zealand

Annex-Data Annex

Switzerland Spain Sweden aScale bIncRatio Portugal United United Average Italy Norway Germany Greece Iceland Ireland Japan Luxembourg Netherlands New Austria Belgium Canada Denmark Finland France Australia

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343

7.79.53.312.0 3.02.55.87.94.85.619.6 6.23.47.95.8 7.8 1990s8.9 5.2 8.79.57.411.9 11.2 10.7

8.4 2.51.48.04.32.87.7 2.50.79.67.3 6.6 1980s7.5 3.3 9.59.47.14.99.06.86.60.814.2 17.5 Average Unemployment

growth

1990s3.6 2.4 2.22.92.32.11.91.92.32.77.31.6 1.55.42.92.83.62.82.72.30.92.33.2 2.8

1980s3.1 2.4 2.02.91.63.12.52.20.72.83.62.3 4.15.02.31.92.43.32.92.22.12.73.2 2.7 economic Average

incomeb capita

15250 18740 2000 25420 16590 18230 24690 24910 27320 27070 23200 21980 23630 27070 26610 22890 24920 26310 30730 43110 22940 28360 35030 23290 25143

8680 9120 15710 15530 17400 15820 15220 15970 17010 16210 10940 15180 16950 15390 12360 16220 11320 Per 1990 15530 16320 19670 14860 15438 22320 21340

1.9 4.32.34.2 1.22.22.42.12.46.04.23.52.33.73.0 3.2 1990s2.5 2.42.12.22.12.2 2.611.1 inflation 9.311.2 2.54.82.911.9 8.317.6 8.03.37.45.6 9.1 1980s8.4 3.8 4.96.56.97.27.42.919.5 Average 10.2 39.2

availability. 1990s2.5 2.3 1.61.31.50.51.41.31.30.92.11.4 1.01.92.81.22.91.31.61.00.71.32.2 1.6 of growth of data on PPS).

indicators

1980s1.2 1.6 1.31.10.82.12.21.20.30.91.52.1 3.11.41.21.01.21.11.51.71.21.41.4 1.4 variation Coefficient

depends 1000 (in and varies population year of households. head Precise

1990sc 17.9 19.0 18.6 19.9 18.3 25.2 12.7 18.9 24.1 24.5 24.2 20.1 19.6 15.7 20.6 22.7 16.4 24.8 20.7 24.0 21.1 24.1

distributiona "Musgravian"
1980sc 15.5 21.6 17.4 18.4 Income 18.8 21.9

15.9 19.0

16.9 15.7 18.4 poorest 21.2 per

Standard B. Table
Zealand Kingdom States

year.

40% prices of available share market at nearest

Annex

Australia Austria Belgium Canada Denmark Germany Finland France Greece Iceland Ireland Italy Japan Luxembourg Netherlands New Spain Sweden Norway Portugal Switzerland United United Average aIncome bGDP cOr

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344

1990s 2.52.61.62.51.83.03.22.33.44.12.52.55.74.52.62.13.33.93.62.83.11.62.6 3.0 investment 1980s 3.03.62.62.92.03.73.22.53.04.33.33.55.14.72.32.13.43.63.42.93.71.92.5 3.2 Public

8.619.6 7.511.8 1990s 19.3 12.0 19.2 18.4 17.9 10.0 15.4 18.7 13.6 12.7 11.2 13.7 11.3 15.1 15.4 15.3 14.1 20.8 20.0 20.4 transfers 8.412.0 9.8 14.7 9.9 14.8 7.219.6 7.014.6 10.7 1980s 17.3 11.2 13.1 13.6 18.5 17.0 13.8 13.4 Social 21.0 20.5 26.7 24.6 16.9

1990s 5.65.86.66.76.96.17.37.74.76.85.25.95.35.76.36.16.84.75.57.17.05.76.0 6.2

1980s 5.05.16.16.27.55.66.46.14.9 Health

5.65.64.75.45.75.86.33.44.68.05.35.04.4 5.6

1990s 5.15.64.66.77.87.15.84.72.75.55.14.43.63.55.16.97.75.24.57.65.65.25.1 5.4

1980s 5.15.65.56.67.15.25.54.72.24.65.54.55.14.86.45.36.43.83.57.45.05.05.7 5.2 Education

15.1 services 18.8 18.5 18.9 17.9 19.5 15.4 19.8 14.7 16.0 15.0 17.7 1990s 18.6 19.9 19.5 23.5 21.5 27.8 23.6 22.0 21.2 21.2 25.9 23.0 and GDP) 15.6 13.9 17.4 19.6 13.7 18.8 19.2 14.5 18.9 19.1 19.8 15.0 18.8 18.9 1980s 19.4 20.9 25.5 20.1 28.0 23.0 22.6 21.7 26.6 20.3 of Goods period. (% the for 1990s 34.5 46.5 38.2 37.7 36.2 63.5 40.9 36.7 53.6 50.1 53.8 52.5 58.3 56.3 52.2 44.0 41.7 49.3 43.7 43.4 48.2 47.3 41.7 45.9 categories expenditurea averages 1980s 35.3 45.4 39.5 39.0 34.1 31.9 56.3 60.8 42.3 37.4 50.6 46.4 46.8 57.9 56.3 50.3 46.6 47.1 40.5 41.2 46.1 Total 49.7 45.1 43.4 Expenditure C. Table Annex Zealand States Kingdom general

government,

Spain Sweden Switzerland aAll United United Average Portugal Germany Greece Italy New Norway Australia Canada Denmark Iceland Ireland Japan Luxembourg Netherlands Austria Finland France Belgium

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345

the (l/x). (l/x). value (l/x). available (BERI). were PPS) value 1000 (l/x). (in

(UCTG). (UIGG). prices

value 86-98 current reciprocal value government of at reciprocal scores. Intelligence population range Risk UNESCO). reciprocal of general 309). (l/x). science GDP), reciprocaltime 1980-1999). government head GNI, (1.1.0.0.ovgd), (1.1.0.0.ovgd). and (page the value (UUTG/UUTGF). of (for prices; per official births), (% 11) of eight prices prices general (UYTGH/UYTGHF) within live Environmental current comparison. comparison. comparison. prices of total (years). at (in% grade kind reciprocal (item mathematics market market government in 1,000 (CPALTT01.IXOB), better better better total surveys market Business health for for for (per than (UNR), education, two 10 items" 10 on 10 expenditure birth, formation reading, approach, general enrolment constant constant from at on current calculated). of infant by other by by at all at rate achievement, at (when was capital explanations school rate, reports demand "CPI, GDP GDP GDP average on 40% divided divided and divided spending expenditure on on transfers on fixed expenditure; consumption expectancy average (1.0.212.0.hvgdp). Series Values Values Values Secondary Mathematical Currency Simple Mortality Life Based Poorest Based Based Ameco, Based Unemployment Total Final Public Public Social Gross

item 2001, 1990,

item 2001, 1990,

item 2001, 1990, (IRIS) 2000). (for Sector 2000/2001 Report 1995, Informal the

1990) ReportYearbook ReportYearbook Report Yearbook (for 2001).

justice" o (for 1990) Competitiveness Competitiveness Competitiveness Competitiveness Competitiveness Competitiveness (for

Annual

series and

2001 World World World World World World 1990) corruption database The The The The The The administration 1990), Indicators and AmecoAmecoAmecoAmeco Ameco Ameco Ameco 2001). in Reform glance, (for environment a (for (for Development at Outlook Forum: Forum, Forum: Forum, Forum: Forum, 2001) Bribing 2001 2001 Expenditure ReportEconomic 2000 (for World Corruption Confidence Institutional (2002) Commission, Commission, WDI Commission, Commission, Commission, Commission, notes WDI Commission, 2.3.16 Regulatory Main Economic Social Economic for Economic Economic Economic Economic Economic on Education on report, 2001 2001 Annual "10.22 item "6.21 "Bureaucracy" "10.04 "Justice" Sources, World World World World World WorldSchneider Based OECD, PISA WDI WDI Center Worldbank: 2000 European OECD, European European OECD, European European Based OECD, European European

Report2002 and

quality growth of inflation of growth

Variables D. Table
tape Indices/variables Corruption Annex Red Efficient judiciary

transport enrolment economy school achievement shadow and

variation subsidies expenditure of services income and deviation economic distribution andeducation mortality health investment public expectancy capita

Size Secondary Education Infant Life Communications Income Coefficient Standard Per Average Unemployment Total Goods Public Public Public Transfers

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