July 2003 | Afonso, António; Schuknecht, Ludger; Tanzi, Vito
This paper examines the performance and efficiency of the public sectors in 23 industrialized OECD countries. The authors compute public sector performance (PSP) and efficiency (PSE) indicators, which include a composite and seven sub-indicators. The first four sub-indicators focus on administrative, education, health, and public infrastructure outcomes, while the other three reflect the standard "Musgravian" tasks for government: allocation, distribution, and stabilization. The input and output efficiency of public sectors across countries is measured using a non-parametric production frontier technique.
The results show moderate differences in overall performance across countries, with countries having smaller public sectors generally reporting higher scores for overall performance, particularly in administrative and economic performance. Countries with larger public sectors tend to show more equal income distribution. Some countries, such as Greece, Portugal, Spain, and Ireland, have managed to improve their public sector performance over the last decade.
Regarding efficiency, countries with smaller public sectors report significantly higher indicators than those with medium or large public sectors. Overall efficiency is highest in Japan, Luxembourg, Australia, the United States, and Switzerland. The Free Disposable Hull (FDH) analysis suggests that the average inefficiency is about 20%.
The paper also discusses the robustness of the findings to different weightings of sub-indicators and highlights the limitations of the non-parametric approach, such as the lack of statistical assessment of differences across countries. The results suggest that spending in big governments could be reduced by about 35% to achieve the same public sector performance. The EU 15 countries show relatively low public sector efficiency compared to the US and other OECD countries in the sample.This paper examines the performance and efficiency of the public sectors in 23 industrialized OECD countries. The authors compute public sector performance (PSP) and efficiency (PSE) indicators, which include a composite and seven sub-indicators. The first four sub-indicators focus on administrative, education, health, and public infrastructure outcomes, while the other three reflect the standard "Musgravian" tasks for government: allocation, distribution, and stabilization. The input and output efficiency of public sectors across countries is measured using a non-parametric production frontier technique.
The results show moderate differences in overall performance across countries, with countries having smaller public sectors generally reporting higher scores for overall performance, particularly in administrative and economic performance. Countries with larger public sectors tend to show more equal income distribution. Some countries, such as Greece, Portugal, Spain, and Ireland, have managed to improve their public sector performance over the last decade.
Regarding efficiency, countries with smaller public sectors report significantly higher indicators than those with medium or large public sectors. Overall efficiency is highest in Japan, Luxembourg, Australia, the United States, and Switzerland. The Free Disposable Hull (FDH) analysis suggests that the average inefficiency is about 20%.
The paper also discusses the robustness of the findings to different weightings of sub-indicators and highlights the limitations of the non-parametric approach, such as the lack of statistical assessment of differences across countries. The results suggest that spending in big governments could be reduced by about 35% to achieve the same public sector performance. The EU 15 countries show relatively low public sector efficiency compared to the US and other OECD countries in the sample.