A country’s performance is significantly influenced by the size and efficiency of its public sector, as well as how effectively it utilizes its often-limited resources. Evaluating the performance of the public sector and understanding the factors driving its efficiency are crucial from both economic and policy perspectives. This evaluation enables the maximization of societal welfare and the optimization of investment projects, thereby stimulating economic growth. The literature has long debated the role and size of government, particularly due to the considerable variations in government spending across countries. This debate gains even more significance in times when governments face stringent budget constraints, especially amidst prolonged periods of low economic growth and limited public resources (Afonso and Schuknecht, 2019). Public sector efficiency is a cornerstone of effective governance, representing the capacity of governmental organizations and institutions to fulfill their mandates, deliver services, and achieve desired outcomes while making the most efficient use of available resources. This concept is crucial in ensuring that taxpayer money is utilized effectively, public services are delivered in a timely manner, and citizens’ needs are adequately addressed. Over the years, researchers and policymakers have extensively explored various dimensions of public sector efficiency, aiming to understand its measurement, determinants, and avenues for improvement.
Policy Paper 33 | Public Sector Efficiency: exploring (some) reasons for why it’s needed
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