EFFICIENCY OF PUBLIC EXPENDITURE ON EDUCATION: COMPARING CROATIA WITH OTHER NMS

A. Ahec Sonje1, M. Deskar-Skrbic2, V. Sonje3

1University College Effectus (CROATIA)
2Erste&Steiermarkischebank.com (CROATIA)
3Arhivanalitika Ltd. (CROATIA)
Contribution of classical growth factors, labor and capital, to the growth performance of modern economies became limited. Modern economies are becoming more knowledge-intensive and service-oriented, which increased the relevance of human capital for mid-term and long-term growth. Thus, education, as the main channel of government’s influence on human capital accumulation, became important research subject in the field of economic growth. In this paper we focus on the efficiency of public expenditure on secondary and tertiary education in New Member States (NMS) as empirical literature shows that only efficient government spending can generate adequate returns in terms of contribution to economic growth. We apply Data Envelopment Analysis (DEA), a non-parametric methodological approach, to assess the relative technical efficiency of public expenditure on secondary and tertiary education in NMS, with a particular focus on Croatia. Input variables in our models are public expenditure on education per student and a % of GDP, while as main output variables for secondary education we use PISA results in 2006, 2009, 2012 and 2015 and for tertiary education (cyclically-adjusted) share of unemployed with a tertiary education in total number of unemployed. We also apply some robustness checks and compare the results with existing literature.