Download Public sector performance and efficiency. The status of

Public Sector Performance
and Efficiency:
The Status of Small Island
States
Alexandra Pizzuto and Jean Paul Fabri
Prepared for the Conference:
“Small States and Resilience Building”
Malta, 23-25 April 2007
‘that government is best which governs
least’
Thomas Pain
Does size matter ?
Public Expenditure (% GDP)
70
60
50
40
30
20
10
0
0
10000
20000
30000
GDP per capita in USD PPP, 2004
40000
50000
Overview




Broader reflections on role and size of
government
Public sector performance and
efficiency matter
Sustainability of public finances
Relevant for economic performance
Measuring performance and efficiency

Steps involved in the construction of
indices:
– Identifying appropriate objectives
– Identifying outcomes of public sector
activities that proxy these objectives
– Setting these outcomes in relation to the
costs
Core objectives of government




Classical school:
basic public goods with limited scope
Keynesian school:
enthusiasm for state intervention
Musgravian objectives:
allocation, stabilisation, redistribution
Public choice school:
criticised big government
Public Sector Performance
Average 10year inflation
Voice &
accountability
Political
instability
Government
effectiveness
Fiscal balance
to GDP
Stability
Governance
Regulatory
quality
External
balance to
GDP
Rule of law
GDP volatility
Corruption
Distribution
UNDP
education
index
Education
UNDP health
index
Health
Gini coefficient
Real GDP
growth
Economic
performance
Unemployment
FDI
performance
Public Sector
Performance
PSP: Results
Rank
1
2
3
4
5
6
7
8
9
10
19
22
23
Country
PSP Index
ICELAND
1.34
SWEDEN
1.32
DENMARK
1.30
BELGIUM
1.30
FINLAND
1.30
LUXEMBOURG
1.29
NORWAY
1.29
JAPAN
1.28
NETHERLANDS
1.26
SWITZERLAND
1.26
BARBADOS
1.19
CYPRUS
1.18
MALTA
1.18
Rank
27
42
44
47
52
70
80
81
82
83
84
85
86
Country
PSP Index
SINGAPORE
1.16
TRINIDAD AND TOBAGO
1.02
MAURITIUS
1.01
BELIZE
1.00
JAMAICA
0.95
DOMINICAN REPUBLIC
0.80
NEPAL
0.65
KENYA
0.63
PAPUA NEW GUINEA
0.59
SENEGAL
0.58
CAMEROON
0.56
NIGERIA
0.56
COTE D'IVOIRE
0.47
PSP: Analysis
SOUTH AMERICA
OCEANIA
SIDS
1.2
1.0
0.8
0.6
0.4
0.2
0.0
NORTH AND
CENTRAL AMERICA
AFRICA
EU-27
ASIA & MIDDLE
EAST
EUROPE (EXCL.
EU-27)
PSP: Analysis
SIDS
1.0
SOUTH AMERICA
0.8
AFRICA
0.6
0.4
0.2
OCEANIA
0.0
EU-27
NORTH AND CENTRAL
AMERICA
ASIA & MIDDLE EAST
EUROPE (EXCL. EU-27)
Governance Index
Health Index
Econom ic Perform ance Index
Education Index
Distribution Index
Stability Index
PSP: Analysis
1
0.9
Resilience Index
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
0.4
0.6
0.8
1.0
1.2
PSP Index
Best Case
Prodigal Son
Self Made
Worst Case
1.4
PSP: Analysis
Governance Index
1.0
0.8
Stability Index
0.6
Education Index
0.4
0.2
0.0
Distribution Index
Health Index
Economic
Performance Index
Best Case
Prodigal Case
Self Made
Worst Case
‘efficiency of performance is what
wins the game’
Pat Riley
Public Sector Efficiency
PSE: Results
Rank
1
2
3
4
5
6
7
8
9
10
16
18
Country
PSE Index
SINGAPORE
4.87
CANADA
4.66
COSTA RICA
3.92
HONG KONG
3.60
EL SALVADOR
2.74
UNITED STATES
2.44
INDIA
2.37
CHINA
1.92
THAILAND
1.92
RUSSIA
1.71
BARBADOS
1.21
MAURITIUS
1.19
Rank
35
45
59
66
70
79
80
81
82
83
84
85
Country
PSE Index
BELIZE
0.84
TRINIDAD AND TOBAGO
0.64
CYPRUS
0.54
JAMAICA
0.51
MALTA
0.49
PORTUGAL
0.44
SLOVAK REPUBLIC
0.42
SOUTH AFRICA
0.40
KUWAIT
0.39
COLOMBIA
0.35
IRAN
0.32
PAPUA NEW GUINEA
0.24
PSE: Analysis
Africa
2.0
SIDS
1.5
1.0
Asia and Middle
East
0.5
South America
0.0
EU-27
Europe (excl. EU27)
Oceania
North and Central
America
PSE: Analysis
1.8
1.6
1.4
PSE Index
Under-spenders
0.7
0.8
Non-Achievers
0.9
1.2
1.0
0.8 1.0
0.6
0.4
0.2
0.0
Efficient
Economies
1.1
1.2
Over-spenders
PSP Index
Africa
EU-27
North and Central Am erica
South Am erica
1.3
Asia and Middle East
Europe (excl. EU-27)
Oceania
SIDS
PSE: Ambiguities
Ranking
PSE
1
2
3
4
5
6
7
8
9
10
16
18
35
45
53
56
59
61
62
63
Country
SINGAPORE
CANADA
COSTA RICA
HONG KONG
EL SALVADOR
UNITED STATES
INDIA
CHINA
THAILAND
RUSSIA
BARBADOS
MAURITIUS
BELIZE
TRINIDAD AND TOBAGO
ICELAND
GERMANY
CYPRUS
FRANCE
NORWAY
NETHERLANDS
PSE
Index
4.87
4.66
3.92
3.60
2.74
2.44
2.37
1.92
1.92
1.71
1.21
1.19
0.84
0.64
0.59
0.57
0.54
0.53
0.53
0.53
Ranking
PSP
27
15
40
28
67
24
68
66
50
51
19
44
47
42
1
11
22
16
7
9
PSP
Index
1.16
1.22
1.03
1.16
0.83
1.17
0.83
0.83
0.97
0.97
1.19
1.01
1.00
1.02
1.34
1.25
1.18
1.21
1.29
1.26
Ranking
PSE
64
66
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
Country
FINLAND
JAMAICA
BELGIUM
AUSTRIA
MALTA
DENMARK
CZECH REPUBLIC
SWEDEN
ITALY
HUNGARY
CROATIA
LUXEMBOURG
ROMANIA
PORTUGAL
SLOVAK REPUBLIC
SOUTH AFRICA
KUWAIT
COLOMBIA
IRAN
PAPUA NEW GUINEA
Ranking
PSE Index
PSP
0.52
5
0.51
52
0.50
4
0.50
12
0.49
23
0.49
3
0.47
17
0.47
2
0.46
30
0.46
25
0.45
36
0.45
6
0.44
39
0.44
32
0.42
26
0.40
79
0.39
35
0.35
69
0.32
71
0.24
82
PSP
Index
1.30
0.95
1.30
1.25
1.18
1.30
1.21
1.32
1.15
1.17
1.10
1.29
1.04
1.14
1.16
0.65
1.12
0.82
0.79
0.59
Only 2/5ths of the countries with a PSE index above average
also had a PSP index above average.
PSE: Ambiguities
6.0
5.0
PSE
4.0
3.0
2.0
1.0
0.0
0
20
40
EXP % GDP
60
80
‘efficiency is doing things right,
effectiveness is doing the right thing’
Peter Drucker
PSE: Other considerations

Growing interest in quality of public spending
Africa
SIDS
South America
20
15
10
5
0
Oceania
Asia and Middle
East
EU-27
Europe (excl. EU-27)
North and Central
America
General Public Services, total (% GDP) 2004
Public spending on education, total (% GDP) 2004
Social Security Benefits, total (% GDP) 2004
Public spending on health, total (% GDP) 2003
PSE: Other considerations
Fiscal discipline
6
5
4
PSE

3
2
1
0
-15
-10
-5
0
DEFICIT % GDP
5
10
15
Public Sector Performance Sustainability:
An Alternative Index
PSPS: Results
Rank
1
2
3
4
5
6
7
8
9
10
19
24
25
Country
NORWAY
ICELAND
SWEDEN
DENMARK
FINLAND
NEW ZEALAND
CHILE
BELGIUM
AUSTRALIA
SWITZERLAND
TRINIDAD AND TOBAGO
BARBADOS
SINGAPORE
PSPS
Index
2.81
1.53
1.43
1.41
1.38
1.34
1.32
1.31
1.29
1.28
1.19
1.17
1.17
Rank
29
33
48
49
52
78
79
80
81
82
83
84
85
Country
CYPRUS
MALTA
MAURITIUS
BELIZE
JAMAICA
SOUTH AFRICA
PAPUA NEW GUINEA
CAMEROON
KENYA
NEPAL
NIGERIA
SENEGAL
COTE D'IVOIRE
PSPS
Index
1.15
1.10
0.91
0.91
0.89
0.63
0.60
0.58
0.56
0.55
0.55
0.53
0.46
PSPS: Results
Rank
1
2
3
4
5
6
7
8
9
10
19
24
25
Country
NORWAY
ICELAND
SWEDEN
DENMARK
FINLAND
NEW ZEALAND
CHILE
BELGIUM
AUSTRALIA
SWITZERLAND
TRINIDAD AND TOBAGO
BARBADOS
SINGAPORE
PSPS
Index
2.81
1.53
1.43
1.41
1.38
1.34
1.32
1.31
1.29
1.28
1.19
1.17
1.17
PSP
Ranking
7
1
2
3
5
20
45
4
13
10
42
19
27
PSP
Index
1.29
1.34
1.32
1.30
1.30
1.19
1.01
1.30
1.24
1.26
1.02
1.19
1.16
Rank
29
33
48
49
52
78
79
80
81
82
83
84
85
Country
CYPRUS
MALTA
MAURITIUS
BELIZE
JAMAICA
SOUTH AFRICA
PAPUA NEW GUINEA
CAMEROON
KENYA
NEPAL
NIGERIA
SENEGAL
COTE D'IVOIRE
PSPS
Index
1.15
1.10
0.91
0.91
0.89
0.63
0.60
0.58
0.56
0.55
0.55
0.53
0.46
PSP
Ranking
22
23
44
47
52
79
82
84
81
80
85
83
86
PSP
Index
1.18
1.18
1.01
1.00
0.95
0.65
0.59
0.56
0.63
0.65
0.56
0.58
0.47
PSPS: Analysis
Africa
1.5
SIDS
1.0
Asia and Middle
East
0.5
South America
0.0
EU-27
Europe (excl. EU27)
Oceania
North and Central
America
PSPS: Analysis
Sustainable
Performance
1.6
Under-spenders
PSPS
1.4
1.2
1.0
0.7
0.8
0.9
Non-Achievers
0.8 1.0
1.1
0.6
1.2
Unsustainable
Performance
0.4
PSP Index
Africa
EU-27
North and Central Am erica
South Am erica
1.3
Asia and Middle East
Europe (excl. EU-27)
Oceania
SIDS
PSPS: Analysis
Resilience Index
1.0
0.8
0.6
0.4
0.2
0.0
0.0
0.5
1.0
1.5
2.0
2.5
PSPS
Best Case
Prodigal Son
Self Made
Worst Case
3.0
‘small is beautiful’
EF Schumacher
SIDS: Stylised facts
Generally perform better
1.6
1.4
1.2
PSP

1.0
0.8
0.6
0.4
0.2
0.0
10
12
14
16
18
Log Population
20
22
SIDS: Stylised facts
Bigger government
Total Government Expenditure
(% GDP)

70
60
50
40
30
20
10
0
10
12
14
16
Log Population
18
20
22
SIDS: Analysis

PSP
Barbados
1.25
Jamaica
1.00
Cyprus
0.75
0.50
Papua New Guinea
0.25
Malta
0.00
Belize
Trinidad and
Tobago
Mauritius
Singapore
SIDS: Analysis

PSP sub-indicators
Barbados
1.0
Jamaica
0.8
0.6
Cyprus
0.4
Papua New Guinea
0.2
Malta
0.0
Belize
Trinidad and
Tobago
Governance Index
Health Index
Stability Index
Mauritius
Singapore
Education Index
Econom ic Perform ance Index
SIDS: Analysis
PSP vs PSE
5.0
Under-spenders
Efficient
Economies
4.5
4.0
3.5
PSE Index

3.0
2.5
2.0
1.5
1.0
0.5
0.7
0.9
0.5
0.0
Non-achievers
BARBADOS
JAMAICA
PAPUA NEW GUINEA
PSP Index
BELIZE
MALTA
SINGAPORE
1.1
1.3
Over-spenders
CYPRUS
MAURITIUS
TRINIDAD AND TOBAGO
SIDS: Analysis
PSP vs. PSPS
1.3
Under-spenders
Sustainable
Performance
1.2
1.1
PSPS

1.0
0.5
0.7
0.9 0.9
1.1
1.3
0.8
0.7
0.6
0.5
Non-Achievers
Unsustainable
Performance
PSP
BARBADOS
BELIZE
CYPRUS
JAMAICA
MALTA
MAURITIUS
PAPUA NEW GUINEA
SINGAPORE
TRINIDAD AND TOBAGO
‘kites rise highest against the wind not with it’
W Churchill
SIDS: Policy implications




Can improve well-being through lawmaking, policy making and
administrative capacity
Learn from other SIDS
Implement public sector reforms
Consolidate public finances
‘it is believed that the performance
and efficiency of the institutional
framework contributes strongly to an
explanation of cross country
differences in economic growth’
D North
PSP vs GDP
1.2
GDP HDI
1.0
0.8
0.6
0.4
0.2
0.0
0.0
1.0
0.5
PSP
1.5
PSE vs GDP
1.2
GDP HDI
1.0
0.8
0.6
0.4
0.2
0.0
0.0
1.0
2.0
3.0
PSE
4.0
5.0
PSPS vs GDP
1.8
1.6
GDP HDI
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
0.0
0.5
1.0
1.5
PSPS
2.0
2.5
3.0
PSP vs Competitiveness
Competitivenesss Index
6.0
5.5
5.0
4.5
4.0
3.5
3.0
0.4
0.6
0.8
1.0
PSP Index
1.2
1.4
PSE vs Competitiveness
Competitiveness Index
6.0
5.5
5.0
4.5
4.0
3.5
3.0
0.0
1.0
2.0
3.0
PSE
4.0
5.0
6.0
Competitiveness Index
PSPS vs Competitiveness
8.0
7.5
7.0
6.5
6.0
5.5
5.0
4.5
4.0
3.5
3.0
0.0
0.5
1.0
1.5
PSPS
2.0
2.5
3.0
Limitations of study

Subjective elements
– Variables chosen
– Weighting procedure

Data problems
– Shortage of data
– Non-homogenous definitions across
countries
Concluding remarks



Important for public sector to perform
well, efficiently and effectively
Public sector must invest in society in
a sustainable manner
Case for public sector reform and to
consolidate public finances are too
compelling to ignore
‘let our advance worrying become
advance thinking and planning’
W Churchill
THANK YOU


Comments are greatly appreciated
Contact
– [email protected]
– [email protected]