Measuring Government Expenditure Efficiencies Towards Peace and Human Development

In this paper, we investigate the efficiency level of government expenditure in 82 countries towards the human development and peace index of the respective countries by using Data Envelopment Analysis (DEA) approach during 2007-2011. We found that only few countries that always being positioned in the efficient frontier during the sample period, namely: Japan, Nigeria, and Norway. By using Malmquist index approach, we also found that Cyprus has the largest government expenditure efficiency improvement.Keywords: Government Expenditure Efficiencies, Human Development Index, Global Peace Indexdoi:10.12695/ajtm.2013.6.2.3 How to cite this article:Prasetyo, A.D., and Pudjono, A.N.S. (2013). Measuring Government Expenditure Efficiencies Towards Peace and Human Development. The Asian Journal of Technology Management 6 (2): 82-91. Print ISSN: 1978-6956; Online ISSN: 2089-791X. doi:10.12695/ajtm.2013.6.2.3


Bac
There the pub by th govern many econom macroe exclusi choice As inc society will fi additio  (Gupta et. al., 1998;Doryan, 2001) and also its productivity (Razmi et. al., 2012). Nevertheless, empirical results might find varieties on the significance of the sectorial expenditures. While agreed on the positive effects of government expenditures towards poverty reduction, Asghar et. al. (2012) found that the impact of government expenditures in health sector was insignificant in Pakistan. Suescún (2007) found that infrastructure spending dominates other forms of public spending (education, health, government consumption and transfers to low-wealth households) in terms of sizable positive effects on growth performance, welfare, human development and social progress in the Latin American countries.
In relation to peace, government expenditure in military services has been traditionally accepted as a medium to provide nation security. There are some cases where military expenditure does not hamper or even gives positive effect to the economy (Murdoch et al., 1997;Atesoglu, 2002;Heo & Hahm, 2006;Bernauer et. al., 2009). However, general acceptance states that military expenditure tends to be a public bad instead of public good (Mintz & Huang, 1990;Gupta et. al, 2001;Abu-Bader & Abu-Qarn, 2003;Barro, 2009).
Government's efficiency is assumed to be the reason why countries with similar economic levels would have a significant gap in the HDI level (Vierstraete, 2012). In addition, the Human Development Report 1991 also mentioned that some retrenchment could be made in government expenses while maintaining the HDI. Government's efficiency is also considered as one of three pillars in erecting peace (IEP, 2012a). Interestingly, despite some beliefs that seen peace (in terms of security) as a foundation of human development (Alkire, 2002), the correlation between HDI and GPI somehow not very high. IEP (2012a) stated that the correlation between HDI and GPI scored -.573.
In this paper, we put the importance of the two indices as measures of human development and peace as targeted outputs that should be pursued by the governments. Our data set includes government expenditures (in terms of percentage to GDP) in 82 countries ranged from 2007 to 2011. Data Envelopment Analysis (DEA) and Malmquist Index are employed to measure the efficiency level of government expenditures on HDI and GPI in the respective countries, and the change of efficiency level during the analysis periods respectively. The rest of the paper is organized as follows: Section 2 will discuss about human development and peace in general. DEA method and Malmquist Index will be explained in Section 3. The result of comparative efficiencies will be analyzed in section 4. And lastly, concluding remarks will appear in section 5

Literature Review 2.1. Human Development
Human development is an alternative measure other than the purely economic indicators that seen people as the real wealth of a nation. UNDP (1990) defined human development as the process of widening people's choices and the level of their achieved wellbeing. The development of HDI was inspired of the capabilities approach proposed by Amartya Sen that focus on what people are able to do and be so that they have more freedom to live the kind of life which they find valuable (Nussbaum & Sen, 1993).
Several dimensions have been proposed in the early development of human development (see Alkire, 2002). However UNDP had extracted them into three measures, i.e. longevity, education, and standard of living. The education component of the HDI is measured by mean of years of schooling for adults aged 25 years and expected years of schooling for children of school entering age. The health component is measured by life expectancy at birth. And the living standard is measured by GNI per capita (PPP). The scores for the three HDI dimension indices are then aggregated into a composite index using geometric mean (UNDP, 1990).

Peace
Abundant studies have been conducted to measure the effect of government expenditure, especially military spending, towards peace and economy. From these studies, common agreement was reached that there are negative correlation between the increasing of government military spending and economy. Barro (2009) explained that during a war time, where military spending is significantly increased, private investments and net exports were hampered. It also overcrowds the nonmilitary government purchase, and changes the consumption expenses. The terms "Peace Dividend" then used to explain phenomenon of immediate reverse of economy condition after a war is over or after military spending retrenchment.

Data and Methodology 3.1. Data
In conducting this study, we obtained data from 82 countries across the world ranged from 2007 to 2011. We obtained Governmentexpenditures-to-GDP ratios from The World Bank's database for the input measures. As for the output measures, Human Development Index and Global Peace Index were obtained from UNDP's and IEP's databases respectively. Table 2 enlists all countries being measured in this study.

Results and Discussion
In general, Japan, Nigeria, and Norway have become the most sophisticated countries in terms of government expenditure efficiency as they have always positioned on the efficient frontier during the analysis period. In more detailed disaggregate analysis, it can be found that Nigeria excels in efficiencies towards both human development and peace in all years. Japanese government expenditure is always efficient towards peace during the 5 years analysis, but only efficient towards human development in 2007 and 2008. On the other hand, Norway is always positioned in the efficient frontier when output is human development, but only appears to be efficient in 2007 towards peace. There are several other countries that appeared on the efficient frontier occasionally, such as The US, Cambodia, Qatar, Australia, Switzerland, Denmark, New Zealand, and Bangladesh. The detailed list of efficient countries can be seen in Table 3 and Table 4. Averagely, the Malmquist Index score equals .983. This means that, in general, the sampled countries have become less efficient during the analysis period. By looking at the data, we reckon that the negative improvement was happened because the increase in government expenditures were not balanced with the increase in HDI score and the decrease in GPI score.

Conclusion
In this paper, we investigate the efficiency level of government expenditure in 82 countries towards the human development and peace index of the respective countries by using Data Envelopment Analysis (DEA) approach during 2007-2011. In general, Japan, Nigeria, and Norway have become the most sophisticated countries in terms of government expenditure efficiency as they have always positioned on the efficient frontier during the analysis period. There are several other countries that appeared on the efficient frontier occasionally, such as The US, Cambodia, Qatar, Australia, Switzerland, Denmark, New Zealand, and Bangladesh. There are 23 countries that made positive improvement of the government expenditure efficiencies measured by Malmquist Index where Cyprus has obtained the largest score. However, in general, the world has obtained negative efficiency improvement. We reckon that this was happened because the increase in government expenditures were not balanced with the increase in HDI score and the decrease in GPI score.