Government spending: efficiency also matters

In the coming years there will be a significant need for debt consolidation resulting from crisis-driven higher debt levels, while significant public investment will become necessary at the same time. It is therefore important to take a closer look at the structure and, above all, the efficiency of government expenditure. That means examining the relationship between the output achieved in pursuing the objectives of expenditure and the money spent. This paper provides input for reflection on this issue. We examine the efficiency of government expenditure in Germany in an international comparison on the basis of current indicators, focusing on the areas of education and infrastructure. Overall, Germany’s public sector so far appears to be quite efficient in both categories. Since the output is rather average, however, the efficiency primarily results from the comparatively low amounts spent on these areas. Remaining efficient even with higher expenditures will be a major challenge.

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