Public Sector Performance and Efficiency : The Status of Small Island States Alexandra Pizzuto and Jean Paul Fabri Prepared for the Conference: “Small States and Resilience Building” Malta, April 2007

‘that government is best which governs least’ Thomas Pain

Does size matter ?

Overview Broader reflections on role and size of government Public sector performance and efficiency matter Sustainability of public finances Relevant for economic performance

Measuring performance and efficiency Steps involved in the construction of indices: –Identifying appropriate objectives –Identifying outcomes of public sector activities that proxy these objectives –Setting these outcomes in relation to the costs

Core objectives of government Classical school: basic public goods with limited scope Keynesian school: enthusiasm for state intervention Musgravian objectives: allocation, stabilisation, redistribution Public choice school: criticised big government

Public Sector Performance Governance Voice & accountability Political instability Government effectiveness Regulatory quality Rule of law Corruption Education UNDP education index Health UNDP health index Stability Average 10- year inflation Fiscal balance to GDP External balance to GDP GDP volatility Distribution Gini co- efficient Economic performance Real GDP growth FDI performance Public Sector Performance Unemployment

PSP: Results

PSP: Analysis

‘efficiency of performance is what wins the game’ Pat Riley

Public Sector Efficiency

PSE: Results

PSE: Analysis

PSE: Ambiguities Only 2/5ths of the countries with a PSE index above average also had a PSP index above average.

PSE: Ambiguities

‘efficiency is doing things right, effectiveness is doing the right thing’ Peter Drucker

PSE: Other considerations Growing interest in quality of public spending

PSE: Other considerations Fiscal discipline

Public Sector Performance Sustainability: An Alternative Index

PSPS: Results

PSPS: Analysis

‘ small is beautiful’ EF Schumacher

SIDS: Stylised facts Generally perform better

Bigger government SIDS: Stylised facts

SIDS: Analysis PSP

SIDS: Analysis PSP sub-indicators

SIDS: Analysis PSP vs PSE

SIDS: Analysis PSP vs. PSPS

‘kites rise highest against the wind - not with it’ W Churchill

SIDS: Policy implications Can improve well-being through law- making, policy making and administrative capacity Learn from other SIDS Implement public sector reforms Consolidate public finances

‘it is believed that the performance and efficiency of the institutional framework contributes strongly to an explanation of cross country differences in economic growth ’ D North

PSP vs GDP

PSE vs GDP

PSPS vs GDP

PSP vs Competitiveness

PSE vs Competitiveness

PSPS vs Competitiveness

Limitations of study Subjective elements –Variables chosen –Weighting procedure Data problems –Shortage of data –Non-homogenous definitions across countries

Concluding remarks Important for public sector to perform well, efficiently and effectively Public sector must invest in society in a sustainable manner Case for public sector reform and to consolidate public finances are too compelling to ignore

‘let our advance worrying become advance thinking and planning ’ W Churchill

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