Efficiency of Pro-Poor Public Spending: Does the Quality of the Public Financial Management (PFM) System Matter? A Cross-Section Study

Sammanfattning: Pro-poor public spending is an important tool used for promoting development and poverty reduction. Yet, it has been hard to find evidence that public spending actually translates into desired outcomes. Public financial management (PFM) systems have been pointed out as one vital factor affecting public spending efficiency, but this has yet not been confirmed in any empirical research. By using new data available from two indexes assessing the quality of the PFM system, this thesis assess whether the quality of the PFM system increases efficiency of public spending within the health- and education sectors. Efficiency of public spending within the two sectors is measured as child (under-5) mortality and education attainment. The results do not give any support to the assumed positive relationship between the quality of the PFM system and public spending efficiency. Due to limitations related to data, such as small sample sizes, the hypothesis should yet not be ruled out. No general conclusion is therefore drawn and the advices from this, first study assessing the PFM systems importance, is to analyze the presumed relationship further. Recommendations are to use a more comprehensive set of data and dependent variables which are more closely linked to public spending efficiency.