Super SBI Dynamic Network DEA approach to measuring efficiency in the provision of public services

The current financial crisis has had a significant impact on European governments' finances and has led to a series of government interventions to control the public debt and deficit. Therefore, the aim of this paper is to identify inefficiencies in the management of public finance, such as overspending, unreasonable debt, and excessive taxes, while maintaining the same level of social welfare. Thus, we propose a two-stage network data envelopment analysis (DEA) structure that accounts for both allocation of the public budget and transformation of government expenditures into services to the people and the economy. Financial assets, debt, and employment have been included as carryover activities over successive periods of time. Finally, a super-efficiency approach allows discriminating between the efficient European governments. We have applied the proposed approach to the period from fiscal years 2008 to 2012. Results show that not only high-deficit countries, but also major countries such as Germany and France have performed poorly. The slack-based measure of inefficiency (SBI) metrics, whose directional vector components are defined as the yearly national GDP, point out the feasible reductions in taxes and debt issuances, along with feasible targets for government expenditure.