OUR WORK / PROJECTS

Efficiency of Public Spending: Azerbaijan, Kazakhstan and Russia

Revenue Watch is examining the efficiency of public spending on health, education and social protection in the former Soviet republics of Azerbaijan, Kazakhstan and Russia. These sectors are central to the improvement of living standards and the acceleration of economic growth in the post-Communist region.

Over the past few years, rising world prices for oil and natural gas have provided a major economic boost for the resource-rich countries of the former Soviet Union. These countries have started to record exceptionally high growth rates, after years of negative growth during the first half of the 1990s. Rising oil and gas prices have generated enormous fiscal revenues and a significant portion of these funds has been spent to improve the social sector, but higher spending alone cannot produce positive social outcomes without substantial improvements in the efficiency of public services.

Rather than focusing on country-level differences in government spending, RWI's current research seeks to identify the influences on variations in spending efficiency at the sub-national level. A preliminary analysis suggests variations in the efficiency of government spending across administrative units in the selected countries.

A better understanding of the determinants of local government expenditure efficiency can help to guide improvements to public sector performance at the national level.

This study measures the efficiency of public spending as a difference between the actual spending and the theoretically possible minimum spending sufficient to produce the same level of actual output. Efficiency measures are computed by comparing the government expenditures for related services and the actual outcomes. This process involves estimation of efficiency frontiers using data envelopment analysis (DEA), a non-parametric method that identifies the source of inefficiencies in the allocation of public funds. Our research aims to offer policy options to improve the efficiency of public spending at both the national and the sub-national level.

ISSUES

Revenue Transparency
The linkages between resource wealth, poverty, conflict and corruption–the so-called "resource curse"–are well documented. Public information and public accountability are the best guarantee that a country's resource wealth will translate into lasting benefits for its citizens over time.
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Expenditure Transparency
It is impossible to ensure proper management of natural resource wealth by looking exclusively at revenues. Transparent and accountable management and expenditure of public funds is essential to addressing the poverty, corruption and autocracy that too often plague resource rich countries.
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COUNTRIES

Iraq
Iraq, a nation of 25 million people, holds the second largest oil reserves in the world. But the pervasive violence, mismanagement and abuse of recent years have denied its people any lasting benefits from this wealth.
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Peru
Overall, Peru performs much better than many resource abundant countries in both revenue and expenditure transparency, thanks to a legal framework that guarantees citizens access to basic information about oil, gas and mining revenues and their distribution and usage.
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LATEST NEWS
PUBLICATIONS

Escaping the Resource Curse

Too often, developing nations with natural resource wealth face greater conflict, corruption, and poverty than developing nations without an abundance of oil, gas or minerals. There are solutions to this "resource curse," but not without fundamental political changes.
Read more about Escaping the Resource Curse and order copies online ...