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A tale of government spending efficiency and trust in the state

Author

Listed:
  • António Afonso

    (Universidade de Lisboa
    REM–Research in Economics and Mathematics, UECE–Research Unit on Complexity and Economics
    CESifo Research Fellow (Center for Economic Studies and Ifo Institute))

  • João Tovar Jalles

    (Universidade de Lisboa
    ISEG, Universidade de Lisboa
    Universidade Nova de Lisboa
    IPAG Business School)

  • Ana Venâncio

    (Universidade de Lisboa
    ADVANCE/CSG and CESifo (Center for Economic Studies and Ifo Institute))

Abstract

This paper empirically links the efficiency and performance assessment of the general government, proxied by efficiency scores, to the trust in government. Government spending efficiency scores are first computed via data envelopment analysis (DEA). Then, relying on panel data and instrumental variable approaches, we estimate the effect of public sector efficiency on citizens trust on national governments. The sample covers 36 OECD countries between 2007 and 2019. We find that the more efficient countries in terms of government spending are Australia, Chile, Ireland, New Zealand, South Korea, Switzerland. Secondly, our main finding is that better public sector spending efficiency is positively associated with citizens’ higher trust in governments. In general, political economy variables and the existence of fiscal rules do not seem to significantly affect our measure of trust. The results hold using alternative proxies for public sector efficiency, alternative measures for trust, specifications with different control variables and different empirical approaches (instrumental variables).

Suggested Citation

  • António Afonso & João Tovar Jalles & Ana Venâncio, 2024. "A tale of government spending efficiency and trust in the state," Public Choice, Springer, vol. 200(1), pages 89-118, July.
    • Handle: RePEc:kap:pubcho:v:200:y:2024:i:1:d:10.1007_s11127-024-01144-6
    DOI: 10.1007/s11127-024-01144-6
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    More about this item

    Keywords

    Government spending efficiency; DEA; Panel data analysis; Confidence effects; Ideology; Fiscal rules;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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