BibTeX
@MISC{Herrera05abstract,
author = {Santiago Herrera and Gaobo Pang},
title = {Abstract},
year = {2005}
}
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Abstract
Governments of developing countries typically spend between 15 and 30 percent of GDP. Hence, small changes in the efficiency of public spending could have a major impact on GDP and on the attainment of the government’s objectives. The first challenge that stakeholders face is measuring efficiency. This paper attempts such quantification and has two major parts. The first one estimates efficiency by calculating the distance between observed input-output bundles and an efficiency frontier (defined as the maximum attainable output for a given level of inputs) estimated for several health and education output indicators. The frontier is estimated by means of the Free Disposable Hull(FDH) and Data Envelopment Analysis (DEA)techniques. Both 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 140 countries using data from 1996 to 2002. The second part of the paper seeks to explain the cross-country variation in efficiency score, controlling for environmental variables. Results show that countries with higher expenditure levels register lower efficiency scores. Similarly happens in countries in which the wage bill is a larger share of the total budget. Other variables that explain cross-country differences are the share of total service provision that is publicly financed (negatively associated with efficiency), the degree of urbanization (positively correlated with efficiency), the prevalence of the HIV/AIDS epidemic (negatively associated with efficiency scores), income inequality (higher inequality associated with lower efficiency), and the degree of external aid financing (negatively associated with efficiency). Though no causality may be inferred from this exercise, it points at different factors to consider when attempting to explain why some countries might need more resources than others to achieve similar educational and health outcomes. I.
Keyphrases
efficiency score second part excess input consumption income inequality efficiency frontier external aid financing cross-country variation first challenge expenditure level total budget wage bill free disposable hull major impact government objective small change cross-country difference maximum attainable output education output indicator environmental variable major part input-output bundle data envelopment analysis several health different factor health outcome total service provision hiv aid epidemic public spending output shortfall
