Efficiency of Public Expenditure in Education and Health

This paper measures the efficiency of public spending in the education and health sectors using Stochastic Frontier Analysis (SFA) and Data Envelopment Analysis (DEA). It covers all EU Member States from 2000 to 2022. The model uses panel data and accounts for country-specific factors such as school systems, economic structure, socio-economic background, and health risks, treated as fixed effects. A common frontier approach, assuming equal access to production technologies across countries, is estimated with both methods. DEA also evaluates variable returns to scale and considers multi-output and multi-input analysis. The analysis shows that most countries operate near their efficiency frontiers for quantitative outcomes (tertiary education attainment rates and life expectancy at 65) while significant gaps seem to exist for qualitative targets (PISA scores and years of healthy life expectancy at 65). DEA analysis suggests the presence of decreasing returns to scale between public spending and outcomes in both domains. Malmquist index calculation points to technological shifts of the frontier to have a role in explaining inefficiency over time.