Spending Review 2018 Comparative Levels and Efficiency of

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Spending Review 2018

Comparative Levels and Efficiency of Irish Public Spending

KEVIN MEANEY, VICTORIA OYEWOLE AND JACOPO BEDOGNI

CENTRAL EXPENDITURE POLICY SECTION

JULY 2018

This paper has been prepared by IGEES staff in the Department of Public Expenditure & Reform. The views presented in this paper do not represent the official views of the Department or the Minister for Public Expenditure and Reform.

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Key Findings

1. Irelands expenditure comparisons are more volatile than other EA countries The volatility of economic output measurements, such as GDP and GNI*, are significantly

higher in Ireland than all the GDP figures of other countries in the sample. This makes it quite

difficult to compare expenditure and causes Ireland’s comparative position to vary significantly

over time.

2. Ireland’s overall spending is close to the Euro-Area average when age and GNI* are

accounted for

On first glance, spending as a percentage of GDP is well below EA norms. However, taking

account of certain differences between Ireland and other EA countries, this gap in spending

tends to shrink. Firstly, using GNI* for Ireland the gap in total spending decreases from 20% of

GDP to 5% of GNI*. Secondly, accounting for the differing age structures across EA countries,

the gap as a percentage of GNI* falls further to only -0.6%.

3. However, the differences in sectoral spending are notable

The two notable gaps that persist are over time are in the health and social protection sectors. Based

on GDP, health is at or slightly under the average spending across the EA. However, this changes when

using a GNI* base and accounting for age, where it is shown that Irish health expenditure is well above

average. The spending on social protection is well below average using all economic output bases and

even after adjusting for age. This is driven by much lower than average spending on ‘old-age’ compared

with the EA average, which likely reflects different social security and state pension systems across the

EA.

4. Ireland is relatively efficient in Education and Social Protection expenditure

The results of the DEA analysis indicates overall, that there could be savings to be made for

expenditure, as well as gains on outcomes. Ireland is relatively efficient in education. Ireland spends

less on education than most of its EU peers and achieves relatively efficient outcomes. However, this

is less true when age adjustments are made to expenditure, where it appears that improvements in

outcomes could be achieved. Likewise the DEA analysis indicates that overall, Ireland is relatively

efficient in social protection expenditure in reducing poverty, but proves to be less true when spending

is adjusted for age profiles.

5. Inefficiencies in Ireland’s public health expenditure

Ireland has a relatively high level of health expenditure in comparison to it EU peers. Ireland is not

achieving the greatest level of efficiency from inputs. Inefficiency in health expenditure is more

pronounced when age adjustments are made to expenditure in GDP, GNI and GNI* terms. The DEA

analysis estimates that there could be considerable savings to be made on inputs as well as possible

gains on possible outputs/outcomes.

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1. Introduction This paper will compare public spending across sectors using Classification of the Functions

of Government (COFOG) data, namely in areas such as Health, Education, Social Protection

and Housing. Similar work has been carried out recent years, see McDonnell (2017)1, but this

analysis will look at comparisons over time, using different peer countries, using a range of

economic output bases (GDP, GNI and GNI*) and finally adjusting for differing age profiles

across the EA. In particular, the analysis will compare the spending in Ireland against peer

countries that form the Euro-Area (EA) over the 2001 to 2015 period. The analysis will use a

range of economic output bases in order to compare across countries given the distortions

caused by the multinational sectors within Ireland. The analysis will also apply an age-

adjusting technique to factor for the differing population structures across the EU countries.

In addition to overall comparisons, the paper will estimate the efficiency of public spending

in the three specific areas of Education, Health and Social Protection (in particular on

poverty). This will update work previously carried out by the IMF (Chailloux, 2016)2, but will

expand on the metrics used in that analysis. The analysis will compare inputs (i.e. expenditure

as % of GDP, as % of GNI/GNI* and on an age adjusted basis) with a range of

outputs/outcomes in these sectors. The paper will make use of Data Envelopment Analysis

(DEA) to estimate the levels to which efficiency could be improved versus frontier countries.

The DEA technique can estimate how much inputs can be reduced to get a similar

output/outcome or how much more outputs/outcomes can be delivered for the same inputs.

The remainder of the paper is structured as follows:

Section 2 details the data and methodology underpinning the analysis.

Section 3 provides a comparison of spending across the EA over the 2001-2015 period on a

headline basis and an age-adjusted basis.

Section 4 provides estimates of the efficiency of public expenditure in the areas of Education,

Health and Social Protection.

Section 5 provides a conclusion for the analysis and some key findings.

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2. Data and Methodology Age-Adjusted Expenditure

Ireland has a relatively young population in comparison to EA countries, as shown in the

graphs below. The youth ratio classified below is the percentage of the population aged 20 or

less, while the older-age ratio is the percentage of the population over 65 in 2015. In both

cases Ireland is at the end of the scale, with the highest proportion of young people and the

lowest proportion of older-age people. The composition of the population has an important

impact on how resources are allocated and should be factored into an analysis of comparative

spending across sectors. For example, in Ireland it should be expected that spending on

pensions and healthcare should be lower than other countries and conversely, spending on

items such as education and family & child supports should be higher.

Figure 7: Comparison of Youth and Older-Age Ratios across the EU, 2015

Source: Eurostat COFOG database; DPER calculations

While older-age dependency rates in Ireland are beginning to increase, Ireland has a much

younger demographic profile in comparison to other EU countries. This can be reflected in

cross-country comparisons by extending a methodology applied to adjust health spending or

demographic outcomes (Redmond, 2012)3 and used in the Mid-Year Expenditure Report

20164. This allows for the calculation of a demographic adjustor to apply to age-related

expenditures, mainly health, pensions and education. In this analysis, all health expenditure

and old-age expenditure in social protection will be adjusted to reflect the lower cohort of

1 Tom McDonnell (2017); Public spending levels: How does Ireland Compare?; NERI 2 Alexandre Chailloux (2016); Public Expenditure Efficiency in Ireland; IMF 3 Redmond, Paul (2012). Expenditure and Outputs in the Irish Health system: A cross country comparison 4 Department of Public Expenditure and Reform (2016). Mid-Year Expenditure Report. Figure 2.6, pp 14

http://www.publicpolicy.ie/wp-content/uploads/HealthSystemIreland.pdf

http://www.per.gov.ie/en/mid-year-expenditure-report-2016/

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older-age people. The pre-primary, primary, secondary and post-secondary sectors in

education and the expenditure on family and child supports in social protection will be

adjusted to reflect the increased cohort of younger people (further detail on the functions

adjusted is contained in Appendix 1). For the age-adjusted analysis below, spending in all the

EA countries within the sample have been adjusted to reflect the differing age structures using

the following formula:

𝐴𝑔𝑒 − 𝐴𝑑𝑗𝑢𝑠𝑡𝑒𝑑 𝑆𝑒𝑐𝑡𝑜𝑟𝑎𝑙 𝐸𝑥𝑝𝑒𝑛𝑑𝑖𝑡𝑢𝑟𝑒

= 𝐸𝐴 𝑠ℎ𝑎𝑟𝑒 𝑜𝑓 (𝑦𝑜𝑢𝑛𝑔/𝑜𝑙𝑑) 𝑝𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛

𝐶𝑜𝑢𝑛𝑡𝑟𝑦 𝑠ℎ𝑎𝑟𝑒 𝑜𝑓(𝑦𝑜𝑢𝑛𝑔/𝑜𝑙𝑑) 𝑝𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛∗ 𝑆𝑒𝑐𝑡𝑜𝑟𝑎𝑙 𝐸𝑥𝑝𝑒𝑛𝑑𝑖𝑡𝑢𝑟𝑒

Data Envelopment Analysis (DEA)

The main analytical methodologies used in this paper include a trend analysis to analyse

public expenditure in Ireland and across the EA over a period of time and Data Envelopment

Approach to assess the degree of efficiency of public spending.

Source: Coelli, 1996

In order to assess the degree of efficiency with which inputs are turned into

outputs/outcomes we utilise the Data Envelopment Analysis (DEA). The DEA approach is built

on the idea of constructing an efficiency frontier represented by the best performing

countries and then assessing how distant a specific country is from the frontier. Distances

proxy for a measure of inefficiencies or efficiency gains that are potentially achievable.

Inefficiencies can be analysed either from an input or from an output perspective. A country

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X is more efficient than another country Y in terms of input if X is able to produce the same

output by using less input. Conversely, X is more efficient than Y in terms of output if X is able

to more output by employing the same amount of input. The frontier is calculated directly

from the data using mathematical linear programming methods. Efficiency is measured from

a scale of 0 to 1. Where 0 represents the most inefficient country and 1 represents the most

efficient country.

DEA is a commonly used approach in assessing the efficiency of inputs (Chailloux, 2016; Dutu

et al., 20165). It is important to note that DEA approach is sensitive to the size of the sample,

choice of inputs and outputs indicators and the presence of outliers. Where outliers are

present efficiency estimates are likely to be biased. To avoid this, ad hoc adjustments were

made to remove possible outliers from the sample. Another quality adjustment we made was

the removal of countries whose health systems are not primarily funded by the government.

Data used in this study are derived from the following data sources: Eurostat, OECD and World

Health Organisation. The following outputs used in this study to measure the efficiency of

public spending are: Pisa Scores, Participation Rates in Education, Life Expectancy, Healthy

Life Years (HALE), Non-communicable disease, Disability and Unemployment Poverty and Risk

of Poverty.

5 Richard Dutu and Patrizio Sicari; Public Spending Efficiency in the OECD: Benchmarking Health Care, Education and General Administration; OECD Working Papers No. 1278, 2016

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3. Comparison of Government Expenditure across the EU and the Euro-Area

Key Findings

1. Ireland’s expenditure comparisons are more volatile than other EA countries

The volatility of economic output measurements, such as GDP and GNI*, are significantly higher

in Ireland than all the GDP figures of other countries in the sample. This makes it quite difficult to

compare expenditure and causes Ireland’s comparative position to vary significantly over time.

2. Ireland’s overall spending is close to the Euro-Area average when age and GNI* are accounted

for

On first glance, spending as a percentage of GDP is well below EA norms. However, taking account

of certain differences between Ireland and other EA countries, this gap in spending tends to shrink.

Firstly, using GNI* for Ireland the gap in total spending decreases from 20% of GDP to 5% of GNI*.

Secondly, accounting for the differing age structures across EA countries, the gap as a percentage

of GNI* falls further to only -0.6%.

Snapshot of 2015 gap between Ireland and Euro-area average expenditure (%)

Total Expenditure Non Age-Adjusted Age-Adjusted

GDP base -19.7 -16.9 GNI base -11.5 -7.9 GNI* base -4.9 -0.6


The two notable gaps that persist are over time are in the health and social protection sectors.

Based on GDP, health is at or slightly under the average spending across the EA. However, this

changes when using GNI* and accounting for age, where it is shown that Irish health expenditure

is well above average. The spending on social protection is well below average using all economic

output bases and even after adjusting for age. This is driven by much lower than average spending

on ‘old-age’ compared with the EA average, which likely reflects different social security and state

pension systems across the EA.

Snapshot of 2015 gap between Ireland and Euro-area average expenditure (%) Non Age-Adjusted Age-Adjusted

Health Expenditure as a % of GDP -1.67 1.18 GNI -0.08 3.58 GNI* 1.21 5.52

Social Protection Expenditure as a % of

GDP -10.71 -10.02 GNI -8.01 -7.13 GNI* -5.84 -4.80

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Governmental expenditure has experienced periods of rapid growth and decline during the

boom and subsequent recession. At the start of the 2000s (the ‘Celtic Tiger’ years), Ireland

was spending comparatively low amounts as a percentage of GDP, due to modest growth in

expenditure while large increases in nominal GDP were materialising. From 2002 onwards,

Ireland’s comparative expenditure ranking steadily increased until 2008, where expenditure

was almost 42% of GDP. This was as a result of successive years of expenditure growth, well

in excess of nominal GDP growth. In more recent years, Ireland has fallen back down the

rankings, with spending the lowest as a percentage of GDP in 2015. This is due to reductions

in expenditure following the crisis and rapid GDP growth in recent years.

Using the new national income metric, modified GNI (GNI*)6, Ireland’s comparative ranking

improves in all years, but the single largest increase of 15 percentage points (pp) occurs in

2015. This larger increase in 2015 illustrates the distortion to GDP caused by the re-domiciling

of foreign owned assets to within Ireland, which the GNI* specifically adjusts for. Using GNI*

shifts Ireland from being at the bottom of the international league table in 2015 to within a

middle grouping of countries, but still somewhat below the Euro-area average.

Figure 1: General Government Expenditure as a % of GDP; 2001, 2008 and 2015

Source: CSO; OECD; DPER calculations

6 This adjusted level indicator adjusts Gross National Income (GNI) for the retained earnings of re-domiciled firms and depreciation on foreign-owned domestic capital assets in the GNI figures, to provide a more accurate measure of national income.

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3.0.1 Complexity of International Comparisons As discussed above, Ireland’s expenditure position has varied significantly since the beginning

of this century and can partly explain changes in comparative rankings over these years.

However, the larger impact on the change in Government spending, as a percentage of GDP,

has been as a result of the large variations in GDP and GNI* itself (the base effect). Looking

back over the past sample, the figures below decomposes the impact of expenditure and

GDP/GNI* annual growth on the annual change in the expenditure/base ratio. The relatively

large negative impacts of economic growth have caused large reductions in the spending ratio

in certain years, particularly 2014 and 2015.

Figure 2: Decomposition of annual change of expenditure as a % of GDP and GNI*

Decomposition of annual change of General Government Expenditure as a % of GDP

Decomposition of annual change of General Government Expenditure as a % of GNI*

Source: AMECO database; DPER calculations

The impact of GDP changes are significantly higher in Ireland than most other countries in the

EU, with figure 3 showing the volatility of nominal GDP growth rates for a number of euro-

area countries. This is also the case for the new GNI* metric calculated by the CSO, where the

volatility is higher than all the other countries GDP figures in the sample. This makes it quite

difficult to target levels of expenditure as a percentage of GDP and causes Ireland’s

comparative position to change very significantly over time.

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Figure 3: Volatility of nominal GDP growth since 2001 for Euro-Area countries (st. dev. %)

Source: AMECO database; DPER calculations

Noting the difficulty in comparing spending across countries and across sectors, the following

section will outline how comparisons change depending on the base used (the analysis will

include GDP, GNI and GNI*) and accounting for the demographic profile of countries across

the Euro-Area. The analysis will use COFOG (Classification of the Functions of Government)

data sourced from the OECD and Eurostat, which allows for a cross-country comparison of

not only the overall spend by Governments but also the sectors in which that spending occurs.

The sectors focussed on in this analysis are Economic Affairs; Housing and Community

Amenities; Health; Education; Social Protection; and ‘Others’. The ‘Others’ section is a catch-

all group which includes General Public Services; Defence; Public Order and Safety;

Environmental Protection; and Recreation, Culture and Religion.

The next section aims to provide a picture for how spending in certain sectors differs between

Ireland and other Euro-Area (EA-19) member states, and also to include an element of age-

adjustment for expenditure in order to factor in the differing demographic profiles across the

EA.

3.1 Comparison of headline spending in selected sectors

There are a number of means to compare spending across countries and bases with which to

compare against. NERI (2017) compared Ireland with a group of 10 comparator countries on

the basis of spending per capita, depending on the sector. They provide some critique of the

use of economic output metrics such as GDP, GNI and GNI* to compare spending “given the

pollution of the Irish national accounts by the tax planning activities of foreign

multinationals”. The cut-off point, of €30,000 in GDP per capita, put Ireland close to the

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lowest spending country (slightly above the UK) in the sample of 11 countries, and well below

the average. The rationale was to ensure that nominal spending per capita could be compared

across countries that are similarly wealthy. However, this is a large assumption given the

wealth differences, size differences, economic model difference and differences in currencies

of the countries in the sample. The subsequent breakdowns by sector then found that Ireland

was a comparatively low spending country.

This paper would argue that spending comparisons against economic output metrics will

provide a more reasonable basis with which to compare spending across countries, despite

the issues with measuring economic output. In this analysis Ireland will be compared against

the average expenditure in the Euro-Area (EA) in each of the sectors of interest, using a base

of the economic output in Ireland and the EA. This will allow for a better comparison for Irish

Government expenditure against advanced peers with whom we share membership of the

EU, a united currency and monetary policy, and more stringent fiscal monitoring under the

revised Stability and Growth Pact.

3.1.1 Comparison of expenditure as a percentage of GDP

Ireland’s expenditure as a % of GDP has been consistently below the EA average since 2001.

From 2001 to 2005, this gap remained consistent at around 14% of GDP. While there were

large increases in expenditure in these year, there were also proportionally large increases in

GDP.

In 2006 and 2007, the growth in expenditure significantly exceeded GDP growth which caused

the gap with the EA average to close somewhat (to a negative gap of 9.5% of GDP in 2007).

The much lower gap levels between 2008 and 2012 can be explained by both the falling GDP

levels in 2008 and 2009 and the automatic stabilisers kicking in on the onset of the global

financial crisis. In particular, the negative gap in social protection spending reduced

significantly between 2008 and 2012 due to the significant increases in spending on

unemployment. Following the immediate years after the global financial crisis, Ireland started

to grow significantly once again, with growth in GDP in excess of expenditure growth. The

overall negative gap had increased back to 11.8% of GDP by 2014, but due to the

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unprecedented nominal growth of c.32% in 2015 the gap further deteriorated to almost 20%

of GDP.

On a sectoral basis, the graph identifies that social protection and ‘others’, in particular, are

at expenditure levels well below the EA norm and these have been the persistent key drivers

of the gap over time. Within these sectors, the key drivers of the gaps have been spending on

‘old age’ and ‘survivors’ in social protection, and ‘public debt transactions’ up until 2008 and

‘defence’ throughout in ‘others’. The gap in ‘old age’ spending could reflect the different state

pensions systems that operate across the EA. Ireland tends to levy relatively low amounts of

Social Security Contributions in comparison to other EA countries and pays a flat benefit

irrespective of the total contributions made, once the minimum qualifying weekly

contributions are made. Other EA member states pay back a percentage of in-work income

which reflects the total social contributions made.

Spending on health and housing & community services have been amongst the sectors most

commonly above the EA average. This picture alters when considering 2015, where the large

increase in the GDP base has caused all sectors to spend below the EA average.

Figure 4: Expenditure as a % GDP – Ireland versus euro-area average


3.1.2 Comparison of expenditure as a percentage of GNI and GNI*

Ireland’s expenditure as a % of GNI has been oscillated above and below the EA average as a

percentage of GNI. In the earlier years of the 2000’s and again following the return to growth

from 2013, expenditure has been below the EA average. This follows a similar pattern to the

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GDP graph above, and the sharp gap increase in 2015 once again captures the unprecedented

growth seen in the economic activity figures, which also impacted GNI.

Between 2008 and 2012, expenditure as a percentage of GNI was above the EA average on

the basis of the falling GNI levels in 2008 and 2009 and the automatic stabilisers kicking in on

the onset of the global financial crisis. In particular, the large negative gap detailed for social

protection in the GDP graphs almost get to zero using the GNI base, again due to the

significant increases in spending on unemployment.

On a sectoral basis, the graph finds similar results to those in the GDP graphs. Social

protection and ‘others’ tend to be at or below the EA norm, while spending on health and

housing & community services remain above the EA average. The positive gap for health has

grown using this metric, with the spending on health getting to 3% of GNI over EA norms

during the crisis period. The main sectoral shift from the GDP figures has been education,

where as a percentage of GNI can be seen to be above EA norms across this period.

Figure 5: Expenditure as a % GNI – Ireland versus euro-area average


The main differences in using the GNI* base are beyond 2007, with the earlier years largely

unaffected. Beyond 2007, the positive gaps seen in 2008 to 2012 are more positive while the

negative gaps following tend to be less negative. Between 2008 and 2015, above average

expenditure as a percentage of GNI* was driven primarily by expenditure in health and

education. Expenditure on social protection has acted as the main underperformer in

comparison with the EA average. The largest impact can be seen in the metric for 2015, where

overall expenditure is 4.9% below the EA average using GNI* as the base.

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Figure 6: Expenditure as a % of GNI* for Ireland versus euro-area average as a % of GNI


3.2 Comparison of age-adjusted spending in selected sectors

In this section, the analysis aims to go bring these comparisons a step further by adjusting the

expenditure ratios for the demographic composition across the EA.

3.2.1 Age-adjusted comparison of expenditure as a percentage of GDP

On an age-adjusted basis, Ireland’s expenditure as a % of GDP mostly remains below the EA

average but for 2008 and 2009. As explained earlier, this can be explained by both the falling

GDP levels in 2008 and 2009 and the automatic stabilisers kicking in on the onset of the global

financial crisis. However, the gaps are significantly lower than in the non-age adjusted

scenarios.

The more distinct differences occur in the sectoral areas, particularly in relation to health and

education. The spending on health now appears to be significantly above average across all

the years, with a peak between 2008 and 2012. For education, in non-age adjusted terms

spending tended to oscillate above and below average. However, it is clear that education

expenditure has remained below average across the sample when accounting for age.

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Figure 8: Age-adjusted expenditure as a % GDP – Ireland versus euro-area average


3.2.2 Age-Adjusted comparison of expenditure as a percentage of GNI and GNI*

On an age-adjusted basis, there has been an increasing amount of years where Ireland’s

expenditure as a % of GNI or GNI* have been above the EA average, between 2017 and 2014.

In the years where expenditure has been below average, the gaps are reduced, particularly

when using the GNI* base. The use of GNI* assists in countering the unprecedented growth

seen in other economic activity figures in 2015. This results in the negative gap in 2015 being

in the region of 0.6% of GNI*, considerably lower than the 19% of GDP gap measured in figure

4 above.

The higher than average spending on health is even more pronounced in these graphs, with

the spending gap peaking at 9% of GNI or 10% of GNI* in 2009. This positive gap has remained

throughout the sample. Apart from 2009 and 2010, social protection spending and others

have remained below average. The negative gap is in the range of 7% of GNI or 4.8% of GNI*

in 2015 for social protection, and this is primarily caused by lower than average spending in

‘old age’ even after accounting for the age profile of the state.

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Figure 9: Age-adjusted expenditure as a % GNI – Ireland versus euro-area average


Figure 10: Age-adjusted expenditure as a % of GNI* for Ireland versus euro-area average as a % of GNI


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4. Efficiency of Public Spending

Key Findings


The results of the DEA analysis indicates overall, that there are savings to be made for

expenditure as well as gains on outcomes. Ireland is relatively efficient in education. Ireland

spends less on education than most of its EU peers and achieves relatively efficient

outcomes. However, this is less true when age adjustments are made to expenditure in

GDP, GNI and GNI* terms, so it appears that improvements in outcomes could be achieved.

Likewise the DEA analysis indicates that overall, Ireland is relatively efficient in social

protection expenditure in reducing poverty, but proves to be less true when spending is

adjusted for age profiles.


Ireland has a relatively high level of health expenditure in comparison to it EU peers.

Ireland is not achieving the greatest level of efficiency from input in comparison with other

EA countries. Inefficiency in health expenditure is more pronounced when age adjustments

are made to expenditure in GDP, GNI and GNI* terms. The DEA analysis estimates that there

are considerable savings to be made on inputs, as well as gains on outputs/outcomes.

This section examines efficiency results of public spending by using a range of economic

output bases (in the areas of Education, Health and Poverty). We first analyse average

government expenditure as a percentage of GDP in per capita terms from 2005 to 2014. To

ensure adequate results for the efficiency of public spending across countries, public spending

is altered to reflect the differing population structure across the EA. Age adjustments are

made to expenditure on the following output bases (GDP, GNI and GNI*). When age

adjustments are made to GDP, GNI and GNI*, we observe differing results. Data Envelopment

Approach (DEA) is utilised to provide numerical illustrations of possible efficiency gains for

Ireland’s public expenditure.

We utilise average government expenditure as a percentage of GDP, GNI and GNI* in per

capita terms from 2005 to 2014, in order to capture sustained government investment over

the period of years leading to that output/outcome in 2015.

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4.1.1 Education Indicators and Spending

PISA Scores and Participation Rates in education are used to measure the efficiency of public

spending on education.

PISA Scores

PISA scores are used to measure the efficiency of government spending on education. PISA

scores allows us to “evaluate education systems worldwide by testing the skills and knowledge

of 15-year-old students” in basic skills of mathematics, reading, problem solving and scientific

literacy (OECD, 2018). PISA scores is a useful output indicator to utilise in terms of

comparisons across countries as it has a wide scope and is not based on a specific school

program of an individual country (Mandle et al., 2008).

Figure 11: Plot of Public Expenditure and Pisa Scores

Source: OECD and Eurostat database; DPER calculations

The result of the DEA analysis shows that Public Expenditure in Education (PEE) in Ireland

when examined under GDP is relatively efficient as Ireland is in close proximity to the

efficiency frontier. Ireland achieves the current output of 509 PISA score and spent an average

of 3.5% of GDP on education from 2005 to 2014. As seen in Table 1, it is estimated that Ireland

could achieve the current output of 509 (PISA score) by spending only 0.5% less of GDP.

Austria Belgium

Czech Republic

Denmark

EstoniaFinland

France

Germany

Greece

Hungary

Iceland

Ireland

Italy LatviaLuxembourg

NetherlandsNorwayPoland

Portugal

Slovakia

Slovenia

Spain

Sweden

United Kingdom

455

465

475

485

495

505

515

525

2.0 3.0 4.0 5.0 6.0

Pis

a Sc

ore

s 2

01

5

Public Education Expenditure % of GDP (2005-2014)

18

Ireland is assessed to be the most efficient country when estimated in age adjusted

expenditure in education in GDP terms (Figure 12). Ireland achieves an efficient outcome of

509 (Pisa Score) and spends 4.9% age adjusted expenditure as a % of GPD on education.

Figure 12: Plot of Age Adjusted Public Education Expenditure (PEE) as a % of GDP and Pisa Scores 2015


However, when age adjusted expenditure is estimated in GNI terms Ireland becomes

relatively efficient as seen in Figure 13 down below.

Figure 13: DEA Analysis of Age Adjusted Public Education Expenditure (PEE) as a % of GNI/GNI* and Pisa Scores 2015


Austria Belgium

Czech Republic

Denmark

EstoniaFinland

France

Germany

Greece

Hungary

Ireland


NetherlandsNorway Poland

Portugal

Slovakia

Slovenia

SpainSweden

United Kingdom

455

465

475

485

495

505

515

525

3.5 4 4.5 5 5.5 6 6.5 7

Pis

a Sc

ore

20

15

Age-Adjusted Public Education Expenditure % of GDP (2005-2014)

Austria Belgium

Czech Republic

Denmark

EstoniaFinland

France

Germany

Greece

Hungary

Ireland Ireland GNI*


NetherlandsNorway Poland

Slovakia

Slovenia

Spain

Sweden

United Kingdom

455

465

475

485

495

505

515

525

3.50 4.00 4.50 5.00 5.50 6.00 6.50 7.00

Pis

a Sc

ore

20

15

Age-Adjusted Public Education Expenditure % of GNI (2005-2014)

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Table 1: DEA Analysis of Public Education Expenditure (PEE) as a % of GDP and Pisa Scores 2015

Original Value Projected Value

Output: PISA Score 509 509 Input: PEE/GDP 3.5% 2.87% Output: PISA Score 509 509 Input: Age Adjusted PEE/GDP 4.9% 4.9% Output: PISA Score 509 512 Input: Age Adjusted PEE/GNI 4.83% 4.83% Output: PISA Score 509 514.51 Input: Age Adjusted PEE/GNI* 5% 5%

The result of the DEA analysis shows that Public Expenditure in Education (PEE) in Ireland

when examined under GDP is relatively efficient as Ireland is in close proximity to the

efficiency frontier. Ireland achieves the current output of 509 PISA score and spent an average

of 3.5% of GDP on education from 2005 to 2014. As seen in Table 1, it is estimated that Ireland

could achieve the current output of 509 (PISA score) by spending only 0.5% less of GDP.

Ireland is assessed to be the most efficient country when estimated in age adjusted

expenditure in education in GDP terms (Figure 12). Ireland achieves an efficient outcome of

509 (Pisa Score) and spends 4.9% age adjusted expenditure as a % of GPD on education.

Although Ireland is relatively efficient. The DEA analysis indicates that Ireland can increase its

PISA Score outcome to 512 by spending the same amount of input of 4.8% of GNI (Table 1).

When the efficiency of age adjusted public spending is viewed in GNI* terms Irelands

proximity to the efficiency frontier changes slightly. It is estimated that Ireland can achieve a

potential output of 514.5 PISA Score by spending the same amount of input of 5% of GNI*.

Participation Rate in Education

In this analysis the participation rate in education includes Pre-primary, primary and

secondary education. Tertiary education is excluded as there is no firm distinction between

government expenditure and private/personal expenditure. Romania and Slovakia are

excluded from the sample as their results indicate they are outliers.

20

Figure 14: Plot of Public Education Expenditure and Participation Rates

Source: Eurostat database; DPER calculations

Table 2: DEA Analysis of Public Education Expenditure (PEE) as a % of GDP and Participation Rate 2015


Output: Participation Rate 21% 22.4% Input: PEE/GDP 3.5% 3.5% Output: PISA Score 21% 21% Input: Age Adjusted PEE/GDP 4.09% 4.09% Output: PISA Score 21% 22.52% Input: Age Adjusted PEE/GNI 4.83% 4.83% Output: PISA Score 21% 22.67% Input: Age Adjusted PEE/GNI* 5% 5%

As seen in Figure 12 Ireland is very close to the efficiency frontier. Ireland achieves an

outcome of 21% participation rate in education and spends 3.5% of average GDP on

education. The DEA analysis estimates that Ireland can achieve 1.4% more than the current

outcome of (21% participation rate) by spending the same input of 3.5% of average GDP on

education (Table 2).

Austria

Belgium

Bulgaria

Croatia

CyprusCzech Republic

Denmark

Estonia

Finland

France

Germany

Greece

Hungary

Iceland

Ireland

ItalyLatvia

LithuaniaLuxembourg

Malta

Netherlands

Norway

Poland Portugal Slovenia

Spain

Sweden

United Kingdom

12

14

16

18

20

22

24

26

28

2 2.5 3 3.5 4 4.5 5 5.5

Par

tici

pat

ion

Rat

e 2

01

5


21

Figure 15: Plot of Age-Adjusted Education Expenditure (PEE) as a % of GDP and Participation Rate 2015


The DEA results of age adjusted expenditure in GDP, GNI and GNI* terms again confirms the

previous result that Ireland is efficient in education. Ireland is at the efficient frontier (Figure

15) and is assessed to be one of the most efficient countries. Ireland is at efficiency frontier

as seen in the diagram above. Ireland achieves an outcome of 21% participation rate in

education and spends 4.09% age adjusted expenditure as a % of GDP on education.

Figure 16: Plot of Age Adjusted Public Education Expenditure (PEE) as a % of GNI/GNI* and Participation Rate 2015


Austria

Belgium

Bulgaria

Croatia


Denmark

Estonia

Finland

France

Germany

Greece

Hungary

Ireland

Italy

Lithuania

Luxembourg

Malta

Netherlands

Norway

PolandSlovenia

Spain

Sweden

United Kingdom

12

14

16

18

20

22

24

4 4.5 5 5.5 6 6.5 7

Par

tici

pat

ion

Rat

e 2

01

5


Austria

Belgium

Bulgaria

Croatia


Denmark

Estonia

Finland

France

Germany

Greece

Hungary

IrelandIreland GNI*

Italy

Lithuania

Luxembourg

Malta

Netherlands

Norway

Poland Slovenia

Spain

Sweden

United Kingdom

12

14

16

18

20

22

24

4 4.5 5 5.5 6 6.5 7

Par

tici

pat

ion

Rat

e 2

01

5

Public Education Expenditure % of GNI (2005-2014)

22

However, when age adjusted expenditure is estimated in GNI terms Ireland becomes

relatively inefficient. From the diagram above it can be seen that Ireland has moved away

from the efficiency frontier. The DEA analysis indicates that Ireland can increase its current

participation rate of 21% to 22.5% by spending the same amount of input of 4.8% of GNI. The

result of the DEA analysis show similar results when the efficiency of age adjusted public

spending is estimated in GNI* terms.

4.1.2 Health Indicators and Spending

The following indicators are used to determining the efficiency of public spending in health:

Healthy Life Years and Non-communicable diseases. It is important to note that other factors

affect health outcomes (lifestyle, genetics, etc.) and not just spending, however the methods

applied in this paper are consistent with prior analysis on efficiency of public spending.

For health indicators the sample is restricted to countries whose health system is mostly

publicly funded. This will allow us to adequately capture the efficiency of public spending.

Countries such as Greece, Hungary, Latvia, Lithuania and Portugal are excluded from this

sample as they are mostly privately funded. Furthermore countries who are outliers in both

input and output terms are excluded as to not distort the results of the DEA analysis. Outliers

can have a significant impact on efficiency scores. Countries that are excluded from the

sample based on being outliers are Switzerland, Bulgaria, Cyprus, Luxembourg, Malta, Poland,

Estonia and Romania.

Healthy Life Years (HALE)

To measure efficiency we link the 10 year average of in GDP terms and age adjusted Public

Health Expenditure in GDP, GNI and GNI* terms to the outcome (HALE) in 2015. The DEA

results indicates that Ireland’s public spending in health is inefficient in GDP terms and

inefficient in age adjusted public spending in GDP, GNI and GNI* terms.

The efficiency of health spending is determined utilising healthy life years at birth as a proxy

of the health systems. Healthy Life Years at birth (HALE) is defined as: “average number of

years that a person can expect to live in "full health" by taking into account years lived in less

than full health due to disease and/or injury” (Eurostat, 2018). Healthy life years has the

23

benefit of being a very wide-ranging measure of population health and is correlated with

other indicators of health. The sample is restricted to countries whose health system is mostly

publicly funded and who are not outliers. Healthy Life Years is a widely used indicator to

determine the efficiency of public spending on health (Alexandre et al., 2016). Healthy Life

Years is a widely used indicator to determine the efficiency of public spending on health

(Alexandre et al., 2016).

Figure 17: Plot of Public Health Expenditure and Health Life Years

Source: Eurostat database; DPER calculations Table 3: DEA Analysis of Public Health Expenditure (PHE) as a % of GDP and Health Life Years 2015


Output: HALE 71.5 72.8 Input: PHE/GDP 7.6% 7.1% Output: HALE 71.5 72.8 Input: Age Adjusted PHE/GDP 12.21% 6.34% Output: HALE 71.5 72.8 Input: Age Adjusted PHE/GNI 14.44% 6.35% Output: HALE 71.5 72.8 Input: Age Adjusted PHE/GNI* 15% 6.35%

Ireland is quite distant from the efficiency frontier as seen in Figure 17 above. Ireland at 71.5

years of life expectancy does not achieve a more efficient outcome than most of its European

Austria

Belgium

Croatia Czechia

DenmarkFinland

France

Germany

Iceland

Ireland

Italy

Lithuania

Malta

NetherlandsNorway

Slovakia

Slovenia

Spain

Sweden

United Kingdom

66

67

68

69

70

71

72

73

74

5.5 6.0 6.5 7.0 7.5 8.0 8.5

Hea

lth

y Li

fe Y

ears

20

15

Public Health Expenditure % of GDP (2005-2014)

24

peers. Malta, Germany and United Kingdom show a similar age expectancy but spend

considerably less on health than Ireland. Ireland currently achieves an outcome of 71.5 HALE

years and spends 7.6% of GDP on public health. It is estimated that Ireland could achieve an

efficiency outcome of 72.8 HALE years by spending only 7.1% of GDP instead of 7.6% (0.5%

less of GDP).

Figure 18: Plot of Age Adjusted Health Expenditure (PHE) as a % of GDP and Health Life Years 2015


Ireland’s inefficiency in health is more pronounced when age adjustments are made to health

expenditure and estimated in GDP, GNI and GNI* terms. Amongst the EA countries, Ireland

spends the most of age adjusted public expenditure as % of GDP on health. Ireland achieves

a current outcome of 71.5 years and spends 12.21% of age adjusted expenditure as a % of

GDP on health. The DEA analysis estimates that Ireland could achieve an outcome of 72.8

healthy life years by significantly decreasing age-adjusted expenditure by spending only

6.34% of GDP instead of 12.21% (5.87% less of GDP).

Austria

Belgium

Croatia Czechia

DenmarkFinland

France

GermanyIreland

Italy

Lithuania

Malta

NetherlandsNorway

Slovakia

Slovenia

Spain

Sweden

United Kingdom

66

67

68

69

70

71

72

73

74

6.00 7.00 8.00 9.00 10.00 11.00 12.00 13.00

Hea

lth

y Li

fe Y

ears

20

15


25

Figure 19: Plot of Age Adjusted Health Expenditure (PHE) as a % of GNI/GNI* and Healthy Life Years


Again we see that Ireland is inefficient when age adjusted public health expenditure is

estimated in GNI and GNI* terms. In Figure 26 above it can be seen that Ireland achieves the

most inefficient result compared to it EA peers. Ireland achieves a current outcome of 71.5

years and spends 14.44% of age adjusted public health expenditure as a % of GNI. When

viewed in GNI* terms Ireland achieves a current outcome of 71.5 years and spends 15% of

GNI* on age adjusted public health. The DEA analysis estimates that Ireland can increase its

current HALE of 71.5% to 72.8% by decreasing spending from 14.44% to 6.35% of GNI (8.09%

less of GDP). And likewise decrease spending from 15% to 6.35% of GNI*(8.65% less of GDP).

Again, Ireland is inefficient when age adjusted public health expenditure is estimated in GNI

and GNI* terms. In Figure 19 above, Ireland achieves the most inefficient result compared to

it EA peers. Ireland achieves a current outcome of 71.5 years and spends 14.44% of age

adjusted public health expenditure as a % of GNI. When viewed in GNI* terms Ireland achieves

a current outcome of 71.5 years and spends 15% of GNI* on age adjusted public health. The

DEA analysis estimates that Ireland can increase its current HALE of 71.5% to 72.8% by

decreasing spending from 14.44% to 6.35% of GNI (8.09% less of GDP). And likewise decrease

spending from 15% to 6.35% of GNI*(8.65% less of GDP).

Austria

Belgium

Croatia Czechia

DenmarkFinland

France

Germany IrelandIreland GNI*

Italy

Lithuania

Malta

NetherlandsNorway

Slovakia

Slovenia

Spain

Sweden

United Kingdom

66

67

68

69

70

71

72

73

4.00 6.00 8.00 10.00 12.00 14.00 16.00

Hea

lth

y Li

fe Y

ears

20

15


26

Non – Communicable Diseases

Like the healthy life years indicator, the non-communicable disease indicator, can be used

as a measure of population health and the effectiveness of the health system. This indicator

tells us the “probability (%) of dying between age 30 and exact age 70 from any non-

communicable diseases: cardiovascular disease, cancer, diabetes, or chronic respiratory

disease” (Eurostat, 2018). For the purposes of this analysis, the probability of not dying

between age 30 and 70 from non-communicable diseases is used, so a higher percentage

represents a better outcome for a country.

Figure 20: Plot of Public Health Expenditure as a% of GDP and Non-Communicable Disease

Source: Eurostat and WHO database; DPER calculations

Table 4: DEA Analysis of Public Health Expenditure as a % of GDP and Non-Communicable Diseases 2015


Output: Non-Communicable Disease 89.7% 91.7% Input: PHE/GDP 7.6% 7.5% Output: Non-Communicable Disease 89.7% 90.9% Input: Age Adjusted PHE/GDP 12.21% 6.79% Output: Non-Communicable Disease 89.7% 90.9% Input: Age Adjusted PHE/GNI 14.44% 6.62% Output: Non-Communicable Disease 89.7% 90.9% Input: Age Adjusted PHE/GNI* 15.06% 6.62%

AustriaBelgium

Croatia

Czechia

Denmark

Finland

France

Germany

Iceland

Ireland

Italy

Netherlands

Norway

Slovakia

Slovenia

Spain

Sweden

United Kingdom

82

83

84

85

86

87

88

89

90

91

92

6.0 6.5 7.0 7.5 8.0 8.5

No

n-C

om

mu

nic

able

Dis

ease

20

15


27

To measure efficiency of Public Health Expenditure (PHE) in a comparative way the diagram

above links the 10 year average of PHE over 2005-2014 to its outcome: probability of not

dying from a non-communicable disease in 2015. The result of the DEA analysis shows that

public expenditure in health in Ireland is not efficient. As seen in the diagram above, Ireland

is not in close proximity to the efficiency frontier, meaning that Ireland is not achieving the

most possible level of efficiency from inputs. Ireland currently achieves an efficiency of 89.7%

probability of not dying from non-communicable disease and spends an average of 7.6% of

GDP on public health. It is estimated that Ireland could achieve an efficient outcome of 91.7%

probability by spending 0.1% less of GDP.

Figure 21: DEA Analysis of Age Adjusted Health Expenditure (PHE) as a % of GDP and Non-communicable

disease 2015


To measure efficiency we link the 10 year average of age adjusted Public Health Expenditure

in GDP, GNI and GNI* terms to the output/outcome – probability of not dying from a non-

communicable disease in 2015. The DEA results indicate that Ireland’s age adjusted public

spending in health is inefficient, in GDP, GNI and GNI* terms. Once again Ireland achieves the

most inefficient result amongst its EA peers. Amongst its EA peers Ireland spends the most of

age adjusted public expenditure as % of GDP on health. Ireland achieves a current outcome

of 89.7% years and spends 12.21% of age adjusted expenditure as a % of GDP on health. The

AustriaBelgium

Croatia

Czech Republic

Denmark

FinlandFrance

Germany

Ireland

Italy

Netherlands

Norway

Slovakia

Slovenia

Spain

Sweden

United Kingdom

82

83

84

85

86

87

88

89

90

91

92

6 7 8 9 10 11 12 13

No

n-C

om

mu

nic

able

Dis

ease

20

15

Age-Adjusted Public Health Expenditure % of GDP (2005-2014)

28

DEA analysis estimates that Ireland could achieve an outcome of 90.9% instead of 89.7% (not

dying from a non-communicable disease). This can be achieved by spending 6.79% of age

adjusted expenditure instead of 12.21% of GDP.

Figure 22: Plot of Age Adjusted Health Expenditure (PHE) as a % of GNI and Non-communicable disease 2015


Once again Ireland achieves the most inefficient result amongst its EA peers. Amongst its EA

peers Ireland spends the most of age adjusted public expenditure as % of GNI on health.

Ireland achieves a current outcome of 89.7% and spends 14.44% of age adjusted expenditure

as a % of GNI on health. In GNI terms, Ireland achieves a current outcome of 89.7% and spends

15.06% of age adjusted expenditure as a % of GNI* on health. The DEA analysis estimates that

Ireland can increase its current outcome (not at risk of dying from non-communicable disease)

of 89.7% to 90.9% by decreasing spending from 14.44% to 6.62% of GNI. And likewise

decrease spending from 15.06% to 6.62% of GNI*.

4.1.3 Poverty Indicators and Spending

The following poverty indicators will be used to estimate public spending efficiency in Social

Protection: Disability Poverty, and Unemployment Poverty.

AustriaBelgium

Croatia

Czech Republic

Denmark

Finland

France

Germany

Ireland Ireland GNI*

Italy

Netherlands

Norway

Slovakia

Slovenia

Spain

Sweden

United Kingdom

82

83

84

85

86

87

88

89

90

91

5 6.5 8 9.5 11 12.5 14 15.5

No

n-C

om

mu

nic

able

Dis

ease

20

15

Age-Adjusted Public Health Expenditure % of GNI (2005-2014)

29

Disability Poverty

This measure views the % of those with a disability who are not at risk of being in poverty.

The following countries are removed from the sample as the results indicate that they are

outliers: Iceland, Czech Republic, Cyprus, Slovakia and Romania. To measure efficiency we link

the 10 year average of Public expenditure in social protection over 2005 to 2014 to the

output/outcome (% of those with a disability who are not at risk of being in poverty). To

measure efficiency we link the 10 year average of age adjusted Public Social Protection

Expenditure in GDP, GNI and GNI* terms to the output/outcome - those with a disability who

are not at risk of being in poverty in 2015. The DEA results indicate that Ireland’s age adjusted

public spending in social protection is relatively efficient, in GDP, GNI and GNI* terms.

Figure 23: Plot of Public Social Protection Expenditure and Risk of not being in Disability Poverty

Source: Eurostat database; DPER calculations Table 5: DEA Analysis of Social Protection Expenditure (SPE) as a % of GDP and Disability Poverty 2015


Outcome: Disability Poverty 77.22% 78.138% Input: SPE/GDP 13.35% 13.35%

Outcome: Disability Poverty 77.22% 78.89%

Input: Age Adjusted SPE/GDP 14.63% 14.63%


Input: Age Adjusted SPE/GNI 17.31% 16.84%


Input: Age Adjusted SPE/GNI* 16.42% 16.42%

Austria

Belgium

Bulgaria

Croatia

Denmark

Estonia

FinlandFrance

Germany

Greece

Hungary

Ireland

Italy

Latvia Lithuania

Luxembourg

Malta

Netherlands

NorwayPoland

Portugal

Slovenia

Spain

Sweden

United Kingdom

65.00

70.00

75.00

80.00

85.00

90.00

10 12 14 16 18 20 22 24

% N

ot

in D

isab

ility

Po

vert

y

Public Social Protection Expenditure % of GDP (2005-2014)

30

Public Expenditure in Social Protection in Ireland is relatively efficient. Ireland is in close

proximity to the efficiency frontier, meaning that Ireland is achieving the most possible level

of efficiency from inputs. Ireland currently achieves an outcome of 77% probability of not

being at risk of poverty with a disability and spends an average of 13.35% of GDP on social

protection from 2004 to 2015. It is estimated that Ireland could achieve an outcome of 78%

probability of not being at risk of poverty with a disability by spending the current input of

13.35% of GDP on social protection.

Figure 24: Plot of Age Adjusted Social Protection Expenditure (SPE) as a % of GDP and not in Disability Poverty 2015


Ireland is relatively efficient as seen in the diagram above. Ireland achieves a current outcome

of 77.2 and spends 14.63% of age adjusted expenditure as a % of GDP on social protection.

The DEA analysis estimates that Ireland could achieve an outcome of 78.89% instead of

77.22% (those with a disability not at risk of being in poverty). This can be achieved by

spending the same current output of 14.63% of age adjusted social protection expenditure of

GDP.

Austria

Belgium

Bulgaria

Croatia

Denmark

Estonia

FinlandFrance

Germany

Greece

Hungary

Ireland

Italy

Lithuania

Luxembourg

Malta

Netherlands

NorwayPoland

Portugal

Slovenia

Spain

Sweden

United Kingdom

65

70

75

80

85

90

12 14 16 18 20 22 24 26

% N

ot

in D

isab

ility

Po

vert

y

Age-Adjusted Public Social Protection Expenditure % of GDP (2005-2014)

31

Figure 25: Plot of Age Adjusted Social Protection Expenditure (SPE) as a % of GNI and not in Disability Poverty 2015


When efficiency is estimated in GNI and GNI* terms we see that Ireland shifts away from the

efficiency frontier and becomes relatively inefficient. Ireland achieves a current outcome of

77.2 and spends 17.31% of age adjusted expenditure as a % of GNI on social protection. When

estimated in GNI*, Ireland achieves an outcome of 77.2 and spends 16.42% of age adjusted

expenditure as % of GNI* on social protection. The DEA analysis estimates that Ireland can

increase its current outcome (those with a disability not at risk of being in poverty) of 77.2%

to 87.3% by decreasing spending from 17.31% to 16.84% of age adjusted expenditure as % of

GNI on social protection. When estimated in GNI* term, Ireland can increase its current

outcome of 77.2% to 86.99% by spending the current input of 16.42% of age adjusted

expenditure as % of GNI* on social protection.

Not At Risk of Unemployment Poverty

This indicator views the % of those not in unemployment poverty. To measure efficiency we

link the 10 year average of Public expenditure in social protection over 2005 to 2014 to the

output/outcome % of those not in unemployment poverty).

To measure efficiency there is a comparison of the 10 year average of age adjusted Public

Social Protection Expenditure in GDP, GNI and GNI* terms to the output/outcome - those not

Austria

Belgium

Bulgaria

Croatia

Denmark

Estonia

Finland

France

Germany

Greece

Hungary

Ireland

Ireland GNI*

Italy

Lithuania

Luxembourg

Malta

Netherlands

NorwayPoland

Portugal

Slovenia

Spain

Sweden

United Kingdom

65

70

75

80

85

90

5 10 15 20 25 30

% N

ot

in D

isab

ility

Po

vert

y

Age-Adjusted Public Social Protection Expenditure % of GNI (2005-2014)

32

at risk of being in of unemployment poverty in 2015. The DEA results indicate that Ireland’s

age adjusted public spending in social protection is relatively efficient, in GDP, GNI and GNI*

terms.

Figure 26: Plot of Public Social Protection Expenditure and Risk of not being in Unemployment Poverty


Table 6: DEA Analysis of Social Protection Expenditure (SPE) as a % of GDP and Unemployment Poverty 2015


Output: Unemployment Poverty 32.9% 49.5% Input: SPE/GDP 13.35% 12.7%

Output: Unemployment Poverty 32.9% 33.04%

Input: Age Adjusted SPE/GDP 14.63% 14.63%


Input: Age Adjusted SPE/GNI 17.31% 17.31%


Input: Age Adjusted SPE/GNI* 16.42% 16.42%

Ireland achieves an outcome of 33% probability of not being in unemployment poverty and

spends 13.35% of average GDP on social protection. The DEA analysis estimates that Ireland

could achieve the level of efficiency to that of Switzerland. Ireland can achieve 10.3% more

than the current outcome of (32.9% probability of not being unemployed and in poverty) by

spending 12.7% of GDP instead of 13.35%.

Austria

Belgium

Bulgaria

Denmark

FinlandFrance

Germany

Greece

Hungary

IrelandItalyLatvia

Lithuania

Luxembourg

Malta

NetherlandsNorway

PolandPortugal

Romania

Slovakia

Spain

Sweden

Switzerland

United Kingdom

15

20

25

30

35

40

45

50

55

10.0 12.0 14.0 16.0 18.0 20.0 22.0 24.0

% N

ot

in U

nem

plo

ymen

t P

ove

rty


33

Figure 27: Plot of Age Adjusted Social Protection Expenditure (SPE) as a % of GDP and Unemployment Poverty 2015


Ireland is relatively efficient as seen in the diagram above. Ireland achieves a current outcome

of 32.9 and spends 14.63% of age adjusted expenditure as a % of GDP on social protection.

The DEA analysis estimates that Ireland can increase the current outcome of 32.9% to 33.04%

(those not at risk of poverty) while spending the current input of 14.63% of age adjusted social

protection expenditure as % of GDP.

Figure 28: Plot of Age Adjusted Social Protection Expenditure (SPE) as a % of GNI and Unemployment Poverty 2015


Austria

Belgium

Bulgaria

Denmark

Finland

France

Germany

Greece

Hungary

Ireland

Italy

Lithuania

Luxembourg

Malta

Netherlands Norway

Poland

PortugalSlovakia

Spain

Sweden

United Kingdom

15

20

25

30

35

40

45

50

12 14 16 18 20 22 24

% N

ot

in U

nem

plo

ymen

t P

ove

rty


Austria

Belgium

Bulgaria

Denmark

FinlandFrance

Germany

Greece

Hungary

IrelandIreland GNI*

Italy

Lithuania

Luxembourg

Malta

Netherlands Norway

Poland

PortugalSlovakia

Spain

Sweden

United Kingdom

15

20

25

30

35

40

45

50

5 10 15 20 25 30

% N

ot

in U

nem

plo

ymen

t P

ove

rty


34

Ireland is relatively efficient in achieving a current outcome of 32.9% and spends 17.31% of

age adjusted expenditure as a % of GNI on social protection. When estimated in GNI*, Ireland

achieves an outcome of 32.9 and spends 16.42% of age adjusted expenditure as % of GNI* on

social protection. The DEA analysis estimates that Ireland can significantly increase its current

outcome (those not at risk of unemployment poverty) of 32.9% to 41.97% by spending the

same input of 17.31% of age adjusted expenditure as % of GNI on social protection. When

estimated in GNI* term, Ireland can increase its current outcome of 32.9% to 41.49% by

spending the current input of 16.42% of age adjusted expenditure as % of GNI* on social

protection.

Not at Risk of Poverty

This indicator views the % of those not at risk of poverty in 2015. To measure efficiency we

link the 10 year average of age adjusted Public Social Protection Expenditure in GDP, GNI and

GNI* terms to the output/outcome - those not at risk of poverty in 2015. The DEA results

indicate that Ireland’s age adjusted public spending in social protection is relatively efficient,

in GDP, GNI and GNI* terms.

Figure 29: Plot of Public Social Protection Expenditure and not at risk of Poverty


Austria

Belgium

Bulgaria

Croatia

Denmark

Estonia

Finland

France

Germany

Greece

Hungary

Ireland

Italy

Latvia Lithuania

Luxembourg

Malta

Netherlands

Norway

Poland

Portugal

Romania

Slovakia

Slovenia

Spain

SwedenSwitzerland

United Kingdom

74

76

78

80

82

84

86

88

90

10 12 14 16 18 20 22 24

% N

ot

at r

isk

of

Po

vert

y


35

Ireland is not far from the efficiency frontier. Ireland achieves an outcome of 83.7%

probability of not being in poverty and spends 13.35% of average GDP on social protection.

The United Kingdom and Germany achieve the same outcome as Ireland but spend more on

social protection. The DEA analysis estimates that Ireland can achieve 1% more than the

current outcome of (83.7% probability of not being in poverty) by spending the same input of

13.35% of GDP on social protection.

Table 7: DEA Analysis of Social Protection Expenditure (SPE) as a % of GDP and Not at Risk of Poverty 2015


Output: Not At Risk Of Poverty 83.7% 84.77% Input: SPE/GDP 13.35% 13.35%

Output: Not At Risk Of Poverty 83.7% 83.7%

Input: SPE/GDP 14.63% 14.63%


Input: PEE/GNI 17.32% 16.84%


Input: PEE/GNI* 16.42% 16.42%

Figure 30: Plot of Age Adjusted Social Protection Expenditure (SPE) as a % of GDP and not at Risk of Poverty 2015


Austria

Belgium

Bulgaria

Croatia

Denmark

Estonia

Finland

France

Germany

Greece

Hungary

Ireland

Italy

Lithuania

Luxembourg

Malta

Netherlands

Norway

Poland

Portugal

Slovakia

Slovenia

Spain

SwedenUnited Kingdom

76

78

80

82

84

86

88

90

12 14 16 18 20 22 24

% N

ot

in P

ove

rty


36

Ireland achieves an efficient outcome of 83.7% and spends 14.63% of age adjusted

expenditure as a % of GDP on social protection. Estonia achieves an efficient outcome of

78.4% while spending 12.09% of age adjusted expenditure as a % of GDP on social

protection. The DEA analysis estimates that Ireland achieves the most efficient outcome for

the current output.

Figure 31: Plot of Age Adjusted Social Protection Expenditure (SPE) as a % of GDP and not at Risk of Poverty 2015


Ireland is relatively efficient. Ireland achieves a current outcome of 83.7% and spends 17.32%

of age adjusted expenditure as a % of GNI on social protection. When estimated in GNI* term,

Ireland achieves an outcome of 83.7 and spends 16.42% of age adjusted expenditure as % of

GNI* on social protection. The DEA analysis estimates that Ireland can increase its current outcome

(those not at risk of t poverty) of 83.7% to 88.4% by decreasing input of 17.31% to 16.84% of age

adjusted expenditure as % of GNI on social protection. When estimated in GNI* term, Ireland can

increase its current outcome of 83.7% to 88.21% by spending the current input of 16.42% of age

adjusted expenditure as % of GNI* on social protection.

4.2 Key Findings of DEA Efficiency Analysis

The results of the DEA analysis indicates overall, that there are savings to be made for

expenditure as well as gains on outcomes. Ireland is relatively efficient in education. Ireland

spends less on education than most of its EU peers and achieves a relatively efficient

outcome. This holds to be true when age adjustments is made to expenditure in GDP, GNI

Austria

Belgium

Bulgaria

Croatia

Denmark

Estonia

Finland

France

Germany

Greece

Hungary

IrelandIreland GNI*

Italy

Lithuania

Luxembourg

Malta

NetherlandsNorway

Poland

Portugal

Slovakia

Slovenia

Spain

SwedenUnited Kingdom

76

78

80

82

84

86

88

90

5 10 15 20 25 30

% N

ot

in P

ove

rty


37

and GNI* terms. The DEA analysis suggest that there are possible small savings and gains to

be made. Likewise the DEA analysis indicates that overall, Ireland is relatively efficient in social

protection expenditure in reducing poverty. There are possible gains that can be made on

outcomes analysed in this study.

Table: DEA Efficiency Scores of Input and Output/Outcomes

GDP Age-Adjusted

GDP Age-Adjusted

GNI Age-Adjusted

GNI*

Education Pisa Scores 0.821 1 0.993 0.989 Participation Rate 0.937 1 0.993 0.926 Health Life Expectancy 0.803 0.982 0.982 0.982 Healthy Life Years 0.982 0.982 0.982 0.982 Non-Communicable Disease 0.978 0.987 0.987 0.987 Social Protection Disability Poverty 0.988 0.979 0.884 0.887 Unemployment Poverty 0.655 0.996 0.784 0.793 Risk of Poverty 0.987 1 0.947 0.949

Public spending on health in Ireland needs to be reviewed and evaluated. The results of DEA

indicates that there are inefficiencies in Ireland’s public health expenditure. Ireland has a

relatively high level of health expenditure in comparison to it EU peers. Ireland is not

achieving the most possible level of efficiency from input. Inefficiency in health expenditure

is more pronounced when age adjustments is made to expenditure in GDP, GNI and GNI*

terms. The DEA analysis estimates that there are considerable savings to be made on input as

well as gains on outputs/outcomes.

38

5. Key Findings

1. Irelands expenditure time-series comparisons are more volatile than other EA countries

The impact of economic output measurements are significantly higher in Ireland than most

other countries in the EA. This is also the case for the new GNI* metric calculated by the CSO,

where the volatility is higher than all the other countries GDP figures in the sample. This

causes Ireland’s comparative position to vary significantly over time.

2. Ireland’s overall spending is close to the Euro-Area average when age and GNI* are

accounted for

On first glance, spending as a percentage of GDP is well below EA norms. However, once

taking account of certain differences between Ireland and other EA countries, this gap in

spending tends to shrink. Firstly, comparing against GNI across all countries, and then using

GNI* for Ireland the gap in total spending decreases from 20% of GDP to 5% of GNI*. Secondly,

accounting for the differing age structures across EA countries, the gap as a percentage of

GNI* falls further to only -0.6%.


In terms of the key sectors, the two that stand out persistently over time are health and social

protection. Health appears to be at or slightly under the average spending across the EA as a

% of GDP. However, this picture changes when using other economic output bases and

accounting for age, where it is shown that Irish health expenditure is well above average. The

spending on social protection is well below average using all economic output bases and even

after adjusting for age. This is driven by lower than average spending on ‘old-age’ compared

with the EA.


The results of the DEA analysis indicates overall, that there are savings to be made for expenditure as

well as gains on outcomes. Ireland is relatively efficient in education. Ireland spends less on education

than most of its EU peers and achieves a relatively efficient outcomes. However, this is less true when

age adjustments are made to expenditure in GDP, GNI and GNI* terms, so it appears that

improvements in outcomes could be achieved. Likewise the DEA analysis indicates that overall, Ireland

39

is relatively efficient in social protection expenditure in reducing poverty, but proves to be less true

when spending is adjusted for age profiles.


Ireland has a relatively high level of health expenditure in comparison to it EU peers. Ireland

is not achieving the most possible level of efficiency from input. Inefficiency in health

expenditure is more pronounced when age adjustments is made to expenditure in GDP, GNI

and GNI* terms. The DEA analysis estimates that there are considerable savings to be made

on input as well as gains on outputs/outcomes.

40

Appendix 1: Functions of Government Spending (COFOG)

Green cells age-adjusted to reflect older-age cohorts and blue cells for younger-age

cohorts.

Code Name (Heading in bold) Code Name (Heading in bold)

Total Total GF 6 Housing and community amenities

GF 1 General public services GF 6.1 Housing development

GF 1.1 Executive and legislative organs, financial and fiscal affairs, external affairs

GF 6.2 Community development

GF 1.2 Foreign economic aid GF 6.3 Water supply

GF 1.3 General services GF 6.4 Street lighting

GF 1.4 Basic research GF 6.5 R&D Housing and community amenities

GF 1.5 R&D General public services GF 6.6 Housing and community amenities n.e.c.

GF 1.6 General public services n.e.c. GF 7 Health

GF 1.7 Public debt transactions GF 7.1 Medical products, appliances and equipment

GF 1.8 Transfers of a general character between different levels of government

GF 7.2 Outpatient services

GF 2 Defence GF 7.3 Hospital services

GF 2.1 Military defence GF 7.4 Public health services

GF 2.2 Civil defence GF 7.5 R&D Health

GF 2.3 Foreign military aid GF 7.6 Health n.e.c.

GF 2.4 R&D Defence GF 8 Recreation, culture and religion

GF 2.5 Defence n.e.c. GF 8.1 Recreational and sporting services

GF 3 Public order and safety GF 8.2 Cultural services

GF 3.1 Police services GF 8.3 Broadcasting and publishing services

GF 3.2 Fire-protection services GF 8.4 Religious and other community services

GF 3.3 Law courts GF 8.5 R&D Recreation, culture and religion

GF 3.4 Prisons GF 8.6 Recreation, culture and religion n.e.c.

GF 3.5 R&D Public order and safety GF 9 Education

GF 3.6 Public order and safety n.e.c. GF 9.1 Pre-primary and primary education

GF 4 Economic affairs GF 9.2 Secondary education

GF 4.1 General economic, commercial and labour affairs

GF 9.3 Post-secondary non-tertiary education

GF 4.2 Agriculture, forestry, fishing and hunting GF 9.4 Tertiary education

GF 4.3 Fuel and energy GF 9.5 Education not definable by level

GF 4.4 Mining, manufacturing and construction GF 9.6 Subsidiary services to education

GF 4.5 Transport GF 9.7 R&D Education

GF 4.6 Communication GF 9.8 Education n.e.c.

GF 4.7 Other industries GF 10 Social protection

GF 4.8 R&D Economic affairs GF 10.1 Sickness and disability

GF 4.9 Economic affairs n.e.c. GF 10.2 Old age

GF 5 Environment protection GF 10.3 Survivors

GF 5.1 Waste management GF 10.4 Family and children

GF 5.2 Waste water management GF 10.5 Unemployment

GF 5.3 Pollution abatement GF 10.6 Housing

GF 5.4 Protection of biodiversity and landscape GF 10.7 Social exclusion n.e.c.

GF 5.5 R&D Environmental protection GF 10.8 R&D Social protection

GF 5.6 Environmental protection n.e.c. GF 10.9 Social protection n.e.c.

41

Quality assurance process To ensure accuracy and methodological rigour, the author engaged in the following quality assurance process.

Internal/Departmental Line management Spending Review Steering group Other divisions/sections

Peer review (IGEES network, seminars, conferences etc.)

External

Other Government Department

Steering group

Quality Assurance Group (QAG)

Peer review (IGEES network, seminars, conferences etc.)

External expert(s)

Other (relevant details)

Documents

Spending Review 2018 Comparative Levels and Efficiency of