Performance Measurement In Public Spending: Evidence From A Non-Parametric Approach

This paper employs the data envelopment analysis (DEA) method to evaluate the performance of public spending and to show how productivity has changed over time for 18 selected OECD countries during 1995 to 2002. Our analysis shows that 14 countries exhibit variable returns to scale, meaning that they could reduce technical inefficiency through internal scale economies. The patterns of changes in efficiency for the countries are further analyzed using the Malmquist productivity index approach. The result shows that total factor productivity is higher in the first sub-period, 1995- 1999, which could be attributed to the increased competition and internationalization of the banking system, which took place in this sub-period due to the accelerated liberalization and deregulation of the financial system. Finally, the Tobit model results of the random effects show that population density, energy production, and corruption have negative effects on efficiency scores, while energy use and creditor have positive effects on them.