This paper evaluates the relevance of taxation for public spending efficiency in a sample of OECD economies for the period of 2003–2017. We start by computing the data envelopment analysis (DEA) scores, and then we evaluate the role of tax structure in explaining these public efficiency scores, using a reduced-form panel data regression specification. Our main findings are as follows: inputs could be theoretically lower by approximately 32–34% and expenditure efficiency is negatively associated with taxation. More specifically, direct and indirect taxes negatively affect government efficiency performance, and the same is true for social security contributions.
- data envelopment analysis (DEA)
- government spending efficiency
- nonparametric estimation
- panel data
- public sector performance
- tax structure