The Efficiency of Government Expenditure - Experiences from Africa


WP/97/153-EAWP/97/153


.The Efficiency of Government Expenditure: Experiences from Africa.
by Sanjeev Gupta, KeikoHonjo, and Marijn Verhoeven

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.