NO. 161. PUBLIC SECTOR EFFICIENCY: IMPLICATIONS FOR PUBLIC DEBT, GROWTH AND PRODUCTIVITY

Chr. Chrysanthakopoulos, P. Bouloumpasis, M. Skotoris Ath. Tagkalakis. 2025.

This paper computes public sector efficiency scores in a group of 39 advanced and emerging market economies from 2000 to 2021. Next, it examines by means of the local projection method the short- to medium-term effects of public sector efficiency on the debt ratio, productivity, and private investment.

We find that an increase in public sector efficiency lowers public debt and enhances its medium-term sustainability. It also significantly increases labor productivity, while yielding more moderate gains in terms of total-factor productivity. The impact on private investment is marginally positive over the medium term. The results remain valid after several robustness checks have been performed.

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