Measuring and Explaining Country Efficiency in Improving Health and Education Indicators

Jayasuriya, Ruwan and Wodon, Quentin (2003): Measuring and Explaining Country Efficiency in Improving Health and Education Indicators. Published in: Efficiency in Reaching the Millennium Development Goals (World Bank Working Paper) No. 9 (June 2003): pp. 5-16.

Abstract

Governments aiming to improve the education and health status of their populations can increase the level of public spending allocated to these sectors, or improve the efficiency of public spending. Since increasing spending is often difficult due to the limited tax base of most developing countries, improving the efficiency of public spending becomes crucial. In order to improve this efficiency, governments have at least two options. The first consists of changing the allocation mix of public expenditures. The second option is more ambitious; it consists of implementing wide-ranging institutional reforms in order to improve variables such as the overall level of bureaucratic quality and corruption in a country, with the hope that this will improve the efficiency of public spending for the social sectors, among other things. In this paper, we use stochastic production frontier estimation methods to compare the impact of the level of public spending on education and health outcomes on the one hand, and the efficiency in spending on the other hand, using life expectancy and net enrolment in primary school as outcome indicators. After estimating efficiency measures at the country level, we analyze in a second step how the quality of the bureaucracy, corruption, and urbanization affect efficiency. We find that urbanization, and to some extent the quality of the bureaucracy are strong determinants of the efficiency of countries in improving education and health outcomes, while the impact of corruption is not statistically significant. Together, these three variables alone explain up to half of the variation in efficiency measures between countries.

• Item Type: MPRA Paper
• Language: English
• Keywords: Millennium Development Goals; education; health; production functions; stochastic frontier
• Subjects: H - Public Economics > H5 - National Government Expenditures and Related Policies

References

Aigner, D.J., C.A.K. Lovell, and P. Schmidt. 1977. “Formulation and Estimation of Stochastic Frontier Production Function Models.” Journal of Econometrics 6: 21-37.

Battese, G.E., and T.J. Coelli. 1995. “A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data.” Empirical Economics. 20: 325-32.

Battese, G.E., and T.J. Coelli. 1992. “Frontier Production Functions, Technical Efficiency and Panel Data: With Applications to Paddy Farmers in India.” Journal of Productivity Analysis 3: 153-69.

Battese, G.E. 1992. “Frontier Production Functions and Technical Efficiency: A Survey of Empirical Applications in Agricultural Economics.” Agricultural Economics 7: 185-208.

Charnes, A., W.W. Cooper, and E. Rhodes. 1978. “Measuring the Efficiency of Decision Making Units.” European Journal of Operational Research 2(6): 429-44.

Chirikos, T.N., and A.M. Sear. 2000. “Measuring Hospital Efficiency: A Comparison of Two Approaches.” Health Services Research 34(6): 1389-408.

Christiaensen, L., C. Scott, and Q. Wodon. 2002. “Development Targets and Costs.” In J. Klugman, ed., A Sourcebook for Poverty Reduction Strategies, Volume 1: Core Techniques and Cross-Cuting Issues. Washington, DC: World Bank.

Coelli, T.J. 1995. “Recent Developments in Frontier Modeling and Efficiency Measurement.” Journal of Agricultural Economics 39(3): 219-45.

Coelli, T.J. 1996. “A Guide to FRONTIER Version 4.1: A Computer Program for Stochastic Frontier Production and Cost Function Estimation.” CEPA Working Paper 96/07. New South Wales, Australia.

Deprins, D., L. Simar, and H. Tulkens. 1984. “Measuring Labor-Efficiency in Post Offices.” In Marchand, M., P. Pestieau, and H. Tulkens, eds., The Performance of Public Enterprises: Concepts and Measurement. Amsterdam: North-Holland.

Evans, D.B., A. Tandon, C.J.L. Murray, and J.A. Lauer. 2000. “The Comparative Efficiency of National Health Systems in Producing Health: An Analysis of 191 Countries.” GPE Discussion Paper Series 29. World Health Organization, Geneva.

Fakin, B., and A. de Crombrugghe. 1997. “Fiscal Adjustments in Transition Economies - Transfers and the Efficiency of Public Spending: A Comparison with OECD Countries.” World Bank Policy Research Paper 1803. World Bank, Washington, DC.

Fried, H.O., C.A.K. Lovell, and S. Schmidt. 1993. The Measurement of Productive Efficiency: Techniques and Applications. London: Oxford University Press.

Grossman, P.J., P. Mavros, and R.W. Wassmer. 1999. “Public Sector Technical Inefficiency in Large U.S. Cities.” Journal of Urban Economics 46(2): 278-99.

Grosskopf, S., and V. Valdmanis. 1987. “Measuring Hospital Performance: A Non-Parametric Approach.” Journal of Health Economics 6(2): 89-107.

Gupta, S., K. Honjo, and M. Verhoeven. 1997. “The Efficiency of Government Expenditure: Experiences from Africa.” IMF Working Paper 97/15. International Monetary Fund, Washington, DC.

Kaufmann, D., A. Kraay, and P. Zoido-Lobaton. 2000. “Governance Matters, from Measurement to Action.” Finance and Development, A Quarterly Publication of the International Monetary Fund (International) 37(2): 10-13.

Keefer, P., and S. Knack. 1997. “Why Don’t Poor Countries Catch Up? A Cross-National Test of An Institutional Explanation.” Economic Inquiry 35: 590-602.

Kirjavainen, T., and H.A. Loikkanen. 1998. “Efficiency Differences of Finnish Senior Secondary Schools: An Application of DEA and Tobit Analysis.” Economics of Education Review 17(4): 377-94.

Kumbhakar, S.C., and C.A.K. Lovell. 2000. Stochastic Frontier Analysis. Cambridge: Cambridge University Press.

Mirmirani, S., and H-C. Li. 1995. “Health Care Efficiency Measurement: An Application of Data Envelopment Analysis.” Rivista Internazionale di Scienze Economiche Commerciali 42(3): 217-29.

Murray, C., J. Kreuser, and W. Whang. 1994. “Cost-Effectiveness Analysis and Policy Choices: Investing in Health Systems.” Bulletin of the World Health Organization 74(4): 663-74.

PRS Group Inc. 1998. International Country Risk Guide (ICRG). New York: PRS Group Inc.

Tulkens, H. 1993. “On FDH Analysis: Some Methodological Issues and Applications to Retail Banking, Courts and Urban Transit.” Journal of Productivity Analysis 4: 183-210.

Tulkens, H., and P., Vanden Eeckhaut. 1995. “Non-Parametric Efficiency, Progress and Regress Measures for Panel Data: Methodological Aspects.” European Journal of Operational Research 80: 474-99.

World Bank. 2001. World Development Indicators. Washington, DC: World Bank.

Zere, E. 2000. “Hospital Efficiency in Sub-Saharan Africa: Evidence From South Africa.” UNU World Institute for Development Economics Research Working Paper 187, United Nations University, Helsinki, Finland.