Miguel St. Aubyn

Non-parametric Approaches to Education and Health Expenditure Efficiency in OECD Countries

We address the efficiency of expenditure in education and health sectors for a sample of OECD countries by applying two alternative non-parametric methodologies: FDH and DEA. Those are two areas where public expenditure is of great importance so that findings have strong implications in what concerns public sector efficiency. When estimating the efficiency frontier we use both measures of expenditure and quantity inputs. We believe this approach to be advantageous since a country may well be efficient from a technical point of view but appear as inefficient if the inputs it uses are expensive. Efficient outcomes across sectors and analytical methods seem to cluster around a small number of core countries, even if for different reasons: Finland, Japan, Korea and Sweden.

Relative Efficiency of Health Provision: a DEA Approach with Non-discretionary Inputs

We estimate a semi-parametric model of health production process using a two-stage approach for OECD countries. By regressing data envelopment analysis output efficiency scores on non-discretionary variables, both using Tobit analysis and a single and double bootstrap procedure, we show that inefficiency is strongly related to GDP per head, the education level, and health behaviour such as obesity and smoking habits. The used bootstrapping procedure corrects likely biased DEA output scores taking into account that environmental variables are correlated to output and input variables.

What Level of Education Matters Most for Growth? Evidence from Portugal

We decompose annual average years of schooling series for Portugal into different schooling levels series. By estimating a number of vector autoregressions, we provide measures of aggregate and disaggregate economic growth impacts of different education levels. Increasing education at all levels except tertiary have a positive and significant effect on growth. Investment in education does not significantly crowd out physical investment and average years of schooling semi-elasticities have comparable magnitude across primary and secondary levels.

Comparing Macroeconomic Returns on Human and Public Capital: An Empirical Analysis of the Portuguese Case (1960-2001)

The impact of human and public capital on growth is a major issue in economic theory and in policy evaluation. Using a cointegrated VAR, we estimate a Cobb-Douglas production function for Portugal with public and human capital. Return rates are then computed with and without dynamic feedbacks. Without these, human capital yields a return comparable to private investment, and smaller than public investment. Considering dynamic feedbacks, private capital responds positively to a shock in public capital, but negatively to a shock in human capital. Consequently, the dynamic feedbacks return on human capital is much lower than on public capital.

Assessing health efficiency across countries with a two-step and bootstrap analysis

Regressing Data Envelopment Analysis (DEA) output efficiency scores on nondiscretionary variables, with a two-stage DEA/Tobit and bootstrap procedures, we show that health inefficiency in Organization for Economic Co-operation and Development (OECD) countries is related to Gross Domestic Product (GDP) per head, education level, obesity and smoking habits.

Public and private investment rates of return: evidence for industrialized countries

We compute the macroeconomic rates of return of public and private investment implicit in a VAR for 14 European Union countries, Canada, Japan and the United States. Results point mostly to positive effects of public and private investment on output, whereas public investment crowds out private investment in a significant number of countries.

Public and private inputs in aggregate production and growth : a cross-country efficiency approach

In a cross section of OECD countries, we replace the macroeconomic production function by a production possibility frontier, total factor productivity being the composite effect of efficiency scores and possibility frontier changes. We consider, for the periods 1970, 1980, 1990 and 2000 one output – GDP per worker – and three inputs – human capital, public physical capital per worker and private physical capital per worker. We use a semi-parametric analysis, computing Malmquist productivity indexes, and we also resort to stochastic frontier analysis. Results show that private capital is important for growth, although public and human capital also contribute positively. A governance indicator, a nondiscretionary input, explains inefficiency. Better governance helps countries to achieve a better performance. Nonparametric and parametric results coincide rather closely on the movements of the countries vis-à-vis the possibility frontier and on their relative distances to the frontier.

Education, Neighborhood Effects and Growth: An Agent-Based Model Approach

Endogenous, ideas-led growth theory and the literature on agent-based modeling with neighborhood effects are crossed. In an economic overlapping generations framework, it is shown how social interactions and neighborhood effects are of vital importance in the endogenous determination of the long run number of skilled workers and therefore of the growth prospects of an economy. Neighborhood effects interact with the initial distribution of skilled agents across space and play a key role in the long run stabilization of the number of skilled individuals. Our model implies a tendency toward segregation, with a possibly positive influence on growth, if team effects operate. The long run growth rate is also shown to depend on the rate of time preference. Initial circumstances are of vital importance for long run outcomes. A poor initial education endowment will imply a long run reduced number of skilled workers and a mediocre growth rate, so there is no economic convergence tendency. On the contrary, poor societies will grow less, or will even fall into a poverty trap, and will diverge continuously from richer ones.

Modernising Public Administration and Economic Growth

The links between public administration modernisation, efficiency of public spending, governance and growth are examined for a sample of 38 developed countries (the OECD plus EU countries). Efficiency and governance are shown to be correlated. Also, different measures of governance are significantly correlated to labour productivity. Results suggest that some governance features are more important for growth, namely, the law and order (including judicial system and control of corruption) and regulation quality.

Network Effects in a Human Capital Based Economic Growth Model

We revisit a recently introduced agent model [ACS, 11, 99 (2008)], where economic growth is a consequence of education (human capital formation) and innovation, and investigate the influence of the agents’ social network, both on an agent’s decision to pursue education and on the output of new ideas. Regular and random networks are considered. The results are compared with the predictions of a mean field (representative agent) model.