Efficiency or Waste? Rethinking Indonesia’s Mandatory Public Spending on Education and Health
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Data Envelopment Analysis, Efficiency, Malmquist Index, Productivity, Mandatory Spending
Abstract
Research Originality — Existing studies on public spending efficiency in the education and health sectors largely rely on aggregated measures, failing to distinguish between fundings sourced from the national budget (APBN) or regional budgets (APBD), or to account for variations in detailed expenditure composition. This study addresses these gaps by offering a disaggregated assessment of mandatory public spending across Indonesian provinces, explicitly incorporating funding source differentiation and expenditure types through the application of Data Envelopment Analysis (DEA) and the Malmquist Index.
Research Objective — This study assesses the efficiency and productivity of mandatory public spending in Indonesia’s education and health sectors by distinguishing funding sources (APBN or APBD) and expenditure types across provinces.
Research Methods — This study utilizes DEA using the BCC model under Variable Returns to Scale (VRS) with an output-oriented specification. This approach is suitable in the context of mandatory public spending where budget allocations cannot be minimized and efficiency must be accomplished. In addition, the Malmquist Productivity Index is also employed to analyze productivity volatility during observed periods.
Empirical Results — The results indicate that only two provinces consistently maintain efficiency in both sectors. Health spending is found to be relatively less efficient than education spending, with considerable variation across regions. Provinces in Java record the highest efficiency levels, while those in Sulawesi, Maluku, and Papua exhibit comparatively lower efficiency. Inefficiencies are more pronounced in regional budgets (APBD), indicating governance and allocation issues at the provincial level. The Malmquist index demonstrates varying productivity trajectories between sectors, and only a few provinces achieve both high efficiency and positive productivity growth.
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