Efficiency of Government Policy during the COVID-19 Pandemic

Abstract

Using data envelopment analysis and stochastic frontier models, we introduce a new country-month index of efficiency of government policy in dealing with the COVID-19 pandemic. Our indices are in respect of 81 countries and cover the period from May 2020 to March 2021. Our framework assumes that governments impose stringent policies with the ultimate goal of saving lives. We use policies listed in the Oxford COVID-19 Containment and Health Index as government policy input, and a deaths-based measure as the output. Importantly, we estimate our output to account for country-month variations in the quality of reporting deaths. Based on their average efficiency, the top five countries are Taiwan, Japan, Estonia, Finland, and New Zealand. We also examine the correlates of our new indices and find that the important and positive ones are institutions, democratic principles, political stability, high public spending in health, female participation in the workplace, and economic equality. Within the efficient jurisdictions, the most efficient ones are those with cultural characteristics of low power distance and high patience. The new index and its correlates produce several avenues for future research.