Public Sector Performance and Efficiency : The Status of Small Island States

1. 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, 23-25 April 2007

2. ‘that government is best which governs least’Thomas Pain

3. Does size matter ?

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

5. 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

6. 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

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

8. PSP: Results

9. PSP: Analysis

10. PSP: Analysis

11. PSP: Analysis

12. PSP: Analysis

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

14. Public Sector Efficiency

15. PSE: Results

16. PSE: Analysis

17. PSE: Analysis

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

19. PSE: Ambiguities

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

21. PSE: Other considerations • Growing interest in quality of public spending

22. PSE: Other considerations • Fiscal discipline

23. Public Sector Performance Sustainability: An Alternative Index

24. PSPS: Results

25. PSPS: Results

26. PSPS: Analysis

27. PSPS: Analysis

28. PSPS: Analysis

29. ‘small is beautiful’EF Schumacher

30. SIDS: Stylised facts • Generally perform better

31. SIDS: Stylised facts • Bigger government

32. SIDS: Analysis • PSP

33. SIDS: Analysis • PSP sub-indicators

34. SIDS: Analysis • PSP vs PSE

35. SIDS: Analysis • PSP vs. PSPS

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

37. 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

38. ‘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

39. PSP vs GDP

40. PSE vs GDP

41. PSPS vs GDP

42. PSP vs Competitiveness

43. PSE vs Competitiveness

44. PSPS vs Competitiveness

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

46. 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

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

48. THANK YOU • Comments are greatly appreciated • Contact • alexiapizzuto@gmail.com • jpfabri@gmail.com