Evaluating Efficiency in the Portuguese Health and Education Sectors

Abstract

Public expenditure in Portugal has been growing in recent years and approached values close to the EU average. Social expenditure, namely with health and education, increased in relative terms. Also, recent growth in public employment resulted greatly from new hirings in these two sectors. Taxation is the dominant source of financing education and health costs. Evaluating efficiency in these sectors is of great importance for public policy - an inefficient situation will imply the possibility of a better performance without increasing allocated resources. Increased health expenditure has been accompanied by a better health status of the Portuguese. Nevertheless, efficiency frontier estimation results provide evidence in favour of inefficiency. A more detailed analysis points towards a structure where nurses and hospital beds are relatively scarce, resources are asymmetrically distributed in geographical terms, and expenditure in pharmaceuticals and ancillary diagnostic services is excessively high. Suggested policy implications include the promotion of cost effectiveness in the public provision of health, a better coordination and integration between hospitals and health centres, a review of personnel management and payments policy, and induced changes in the pharmaceutical market, in users behaviour and in formation policy. In what concerns education, enrollment rates have progressed along with expenditure growth, school expectancy in Portugal being close to EU average values. Even if average expenditure per student is lower than the EU average, results presented here point towards inefficiency in this sector. Graduation rates at the end of secondary education are too low and Portuguese student performance is disappointing at an international level. It is suggested that promoting efficiency in this sector should include a careful examination and reassessment of teaching standards in secondary schools, namely in key knowledge areas, a careful and open assessment of school performance, a review of personnel management and payments policy, a review of the breakdown of educational expenditures by resource category and the development of a life-long education program.

Keywords: Government expenditure and education, government expenditure and health, goverment expenditure efficiency

JEL Classification: I18, I21, I28, H51, H52