The efficiency of government expenditure : experiences from Africa

This paper attempts to provide a cross-country comparison of the efficiency of government expenditure on education and health in 38 countries in Africa during 1984-95 by using data on public sector inputs and outputs in education and health and Free Disposal Hull (FDH) analysis--a technique developed to empirically assess the efficiency of production in a market environment. FDH analysis distinguishes between efficient and inefficient producers. All efficient producers are assumed to be on the production possibility frontier, which indicates the maximum output at a given level of input. The degree of inefficiency can be measured by the efficiency score, which measures the distance of the inefficient producer to the production possibility frontier. The results of the FDH analysis reveal wide-ranging differences in the efficiency of government spending on education and health in Africa. On the basis of standards established by other countries in Africa, Asia, and Western Hemisphere in providing education and health services, The Gambia, Guinea, Ethiopia, and Lesotho score relatively well, while Botswana, Cameroon, Côte d.Ivoire, and Kenya do not. The results suggest that the productivity of government spending on education and health has improved over time in Africa, although the average level of efficiency has declined in comparison with Asia and the Western Hemisphere. The observed inefficiencies in countries in Africa seem unrelated to the level of private spending, but may be connected to the share of government wages in total spending. The results also indicate that the degree of inefficiency is higher at higher levels of per capita spending. The central message of this paper is that increasing budgetary allocations for education and health may not be the only or most effective way to increase education and health output, and that more attention should be given to increasing the efficiency of expenditure.