A Tale of Government Spending Efficiency and Trust in the State

Antonio Afonso, Joao Jalles and Ana Venâncio

No 2022/0253, Working Papers REM from ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa

Abstract: This paper empirically links the efficiency and performance assessment of the general government, proxied by efficiency scores, to the trust in government. Government spending efficiency scores are first computed via data envelopment analysis (DEA). Then, relying on panel data and instrumental variable approaches, we estimate the effect of public sector efficiency on citizens trust on national governments. The sample covers 36 OECD countries between 2007 and 2019. We find that the more efficient countries in terms of government spending are Australia, Chile, Ireland, New Zealand, South Korea, Switzerland. Secondly, our main finding is that better public sector spending efficiency is positively associated with citizens’ higher trust in governments. In general, political economy variables and the existence of fiscal rules do not seem to significantly affect our measure of trust. Results were held using alternative proxies for public sector efficiency, specifications with different control variables and instrumental variables approaches.

Keywords: government spending efficiency; DEA; panel data analysis; confidence effects; ideology; fiscal rules (search for similar items in EconPapers)
JEL-codes: C14 C23 E44 G15 H11 H50 (search for similar items in EconPapers)
Date: 2022-12
New Economics Papers: this item is included in nep-pol
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Related works:
Journal Article: A tale of government spending efficiency and trust in the state (2024)
Working Paper: A Tale of Government Spending Efficiency and Trust in the State (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:ise:remwps:wp02532022

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