Government Spending Efficiency in Latin America

Abstract

We assess the public spending efficiency of 20 Latin American countries over the period of 2000- 2019, computing Data Envelopment Analysis efficiency scores. For the Public Sector Performance composite indicator, we use the annual data of socio-economic indicators, and for the input measure we consider Total Public Spending as a percentage of GDP, by spending category. The results show that public spending during the period under study increased, but that overall governments were not efficient, as on average they could have used 27% less spending to achieve the same levels of performance. On the other hand, governments could have increased their performance by 18% whilst maintaining the same level of spending. The most-efficient countries were Chile, Guatemala, Panama, and Paraguay, with the least efficient being Bolivia, Venezuela, Nicaragua, Suriname, and Brazil.

Keywords: government efficiency, Data Envelopment Analysis, government spending, Latin America

JEL Classification: H110, C130, C140, H500