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
education^5. In addition, studies indicate that the social return on investment in education is highest
when spending is on pre-school education^6 , which would suggest redirecting public spending on
education to this specific area. On the other hand, more technologically advanced countries appear
to get a higher value for money from tertiary education^7. Regarding R&D spending, some studies
investigate the leverage effect of public R&D spending on private R&D^8. High levels of
government funding for R&D may go hand in hand with a good innovative performance. First
preliminary results of the study commissioned by the Commission on efficiency and effectiveness
of public R&D spending suggest that efficiency gains are possible. Moreover, it seems that the
most efficient countries maintain their high efficiency performance over time. The study will be
available by the beginning of 2008.- Structural reforms and institutional changes as policy tools help improve the performance of public
spending. Structural reforms can play a role. For example, the leverage effect of public R&D on
private investment in R&D and innovation could be amplified in a more competitive and business
friendly environment. Most Member States have already taken steps in this direction. Besides
opening up new areas of the economy to competition, reforming organisational aspects of public
administration (e.g. the degree of outsourcing) also offers the potential for an improved public
sector efficiency performance. Diverse approaches have been adopted by Member States to
reforming institutional arrangements. These approaches concentrate primarily on changing budget
procedures, and introducing results (output) oriented approaches to budgeting. Countries are at
different stages of using or introducing performance information (i.e. performance measures and
evaluations) into their budget processes. While shifting the budgetary focus from money spent
(input) to output and outcome achieved, some Member States, like the UK and the NL, have
gained experience in output-measurement. Experiences show that criteria like simplicity,
transparency and focus have to be fulfilled in order to make optimal use of performance
information and efficiency measurement.
Against this background, the importance of a more in-depth exchange of national experiences in
increasing the efficiency of public spending has been stressed at the Informal Ecofin. A better
identification of structural and institutional determinants of efficiency and a better understanding of their
interactions could help to shape a more consistent policy agenda. Therefore, the EPC and Commission
launched a questionnaire to gather more information in these areas (see also Annex 1).
A first screening of the responses showed that Member States have adopted various approaches to
enhance the efficiency of their public spending. Generally, reforms of institutional arrangements, e.g.
decentralisation of political power, changing budget practices and procedures, are used to enhance
efficiency. Very often these reforms go hand in hand with enhancing transparency and a clearer division
of responsibilities and accountability. Structural changes, like increasing the scale of operations, are used
in specific areas like education and health care (see Annex 1 for more details).
However, a more systematic screening of the information is necessary to draw more concrete
conclusions. In addition, little information is available about the impact of reform initiatives so far.
efficiency in primary and secondary education", OECD Economics Department Working Paper No. 546(^5) OECD (2007), "Linkage between performance and institutions in the primary and secondary education sector"
(^6) Heckman J.A. (1999), "Policies to foster human capital" (NBER 7288)
(^7) Vandenbussche J., Aghion P. and Meghir C. (2006), "Growth, distance to frontier and composition of human capital", J
Econ Growth 11, pp. 97-127.
(^8) For a comprehensive review of empirical evidence, please see David P. A., Hall B. H. and Toole A. A. (2000), "Is public
R&D a complement or substitute for private R&D? A review of the econometric evidence," Research Policy, Elsevier,
vol. 29(4-5), pp. 497-529, April; and García-Quevedo J. (2004), "Do Public Subsidies Complement Business R&D? A
Meta-Analysis of the Econometric Evidence", Kyklos, 57(1), pp. 87-107