Measuring government in the 21st century

Although markets are the ideal method of resource allocation, government serves a necessary and important function, providing programs and services that affect our quality of life in numerous ways. However, as government spending has grown over the past 100 years, both in terms of spending per person and as a share of the economy, it has become clear that bigger government is not always better government. In fact, numerous studies have found there is a negative relationship between government size and economic growth. Given the mushrooming number of services provided by government, taxpayers deserve to know what kind of value they are getting for their money. Toward that end, this study analyzes the size, growth, efficiency, and cost-effectiveness of government across 34 OECD countries and develops a measure for public sector efficiency it dubs the “cost-effectiveness index.” The results reveal that the most efficient public sector is found in South Korea, followed by Luxembourg, Switzerland, Australia, Norway, Chile, Mexico, Canada, the United States, and Japan. At the other end of the spectrum are Poland, Portugal, Greece, Hungary, and Turkey.