Figure 1 - Performance of pupils (PISA scores) in relation to spending on
educationFIPTSEAT DKPL
DEHU
ITESSKELCZNLIE4604704804905005105205305405503,00 3,50 4,00 4,50 5,00 5,50 6,00 6,50 7,00
Spending on education 2000 as % of GDPPISA 2003 - Student performance in the domain Readin(mean score)Source: Eurostat, OECD
Public spending on education varies greatly in EU-countries and so do education outputs as reflected in
Figure 1 for one indicator of education output (i.e. Pisa score reading). This can be related to a number of
different factors, and caution needs to be exercised in the interpretation of such a table. However, recent
work suggests that, in a number of countries, reforms could visibly reduce expenditure while maintaining
education outcomes^2. This is especially important since traditionally the European education systems are
mainly financed by public means. However, the performance of pupils as measured by the PISA index
does not clearly reflect the money spent on education. The Netherlands and Ireland, for example, score
relatively well in the PISA test and spend in comparison little money on education as a percentage of
GDP. Austria, Portugal and Finland spend similar amounts on education as a percentage of GDP, but the
performance of their pupils is quite different.
However, cross-country differences in efficiency can also be explained by country-specific institutional
arrangements and structural characteristics which complicates comparisons. Recent investigations on
efficiency of education spending suggest that factors such as parents' education or greater decision
making autonomy at school-level (more competition between schools) affect the efficiency of money
spent on education3. Also, relative per capita GDP plays a role in some countries. In addition, studies
indicate that the social return on investment in education is highest when spending on pre-school
education4, which would suggest redirecting public spending on education to this specific area. On the
(^2) Afonso A., St. Aubyn M. (2006), "Cross-country efficiency of secondary education provision: A semi-parametric
analysis with non-discretionary inputs", Economic Modelling 23 (3), 476-491.; Afonso A., St. Aubyn M. (2005), “Non-
parametric Approaches to Public Education and Health Efficiency in OECD Countries,” Journal of Applied Economics 8
(2), 227-246.; Sutherland D., Price R, Joumard I. and Nicq C. (2007), "Performance Indicators for public spending
efficiency in primary and secondary education", OECD Economics Department Working Paper No. 546
(^3) OECD (2007), "Linkage between performance and institutions in the primary and secondary education sector"
(^4) Heckman J.A. (1999), "Policies to foster human capital" (NBER 7288)