Evaluating the efficiency of fiscal responses to COVID-19 pandemic in the OECD countries: a two-stage data envelopment analysis approach

Abstract

This study examines the relative technical efficiency (TE) of the fiscal stimulus packages introduced by the governments of 38 OECD countries in response to COVID-19 pandemic, using a two-stage data envelopment analysis (DEA) approach. The DEA results indicate that OECD countries are inefficient as they have the potential to save around 54.8% of their fiscal packages while maintaining the same performance in terms of economic growth and unemployment. Costa Rica, Greece, Ireland, Italy, Mexico, and Turkey are found to be fully efficient whereas Canada, Germany, Japan, the USA, and the UK are found to be the least efficient. The Tobit findings indicate that belonging to the EU, public expenditure on education, and population density, are positively correlated to the TE scores. In contrary, general government final consumption expenditure, size of fiscal stimulus packages, and COVID-19 infections rate tend to affect efficiency negatively.