Efficiency of Public Expenditure on Human Capital in Selected Regions and City Administrations, Ethiopia

Abstract

The research investigates inefficiencies in public spending on education across various
regions in Ethiopia, despite generally high efficiency scores. Its primary goal is to
analyze these inefficiencies and identify ways to enhance the technical efficiency of both
educational and health expenditures for improved outcomes. Utilizing panel data from
the 2008/09 to 2020/21 fiscal years, the study encompasses ten regions, including Afar,
Amhara, Benishangul Gumuz, Gambela, Harari, Oromia, Southern Nations,
Nationalities and Peoples, Somali Regional States, along with Addis Ababa and Dire
Dawa City Administrations. Data Envelopment Analysis (DEA) was employed to assess
the efficiency of public expenditures in the education and health sectors. The results
indicate that health expenditure efficiency surpasses that of education, with average
efficiency scores for health spending ranging from 0.992 to 1.000. While average
efficiency scores for educational spending ranging from 0.828 to 0.981, reflecting a
commendable but improvable allocation of resources. Significant potential for enhancing
educational efficiency exists, which is vital for advancing educational outcomes and
fostering regional development. The study stresses the importance of optimizing public
spending in education to maximize its impact on learning and development. By
identifying gaps and inefficiencies, policymakers can allocate resources more effectively
to areas in need, leading to successful educational programs that benefit local
communities. Additionally, the analysis provides insights into the current efficiency
landscape and sets the stage for future research and policy initiatives aimed at improving
educational outcomes in Ethiopia, thereby promoting regional development and social
equity through targeted interventions and strategic planning.