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1.A supposed causal link between transparency and good (or better) government can

operate at a number of levels, depending on what aspect of good (or better) government is beingconsidered.

At a very basic level, transparency is often seen as an essential factor for keeping

governments honest and for reducing the extent of government corruption. However, even withinthis restricted focus, the notion of improving government performance through transparency can be approached from a number of different perspectives. In the first place, the concept ofgovernment transparency itself, like that of open government, has a number of connotations.

Alternatively, government performance may refer to the implementation of given policiesand the extent to which government agencies succeed in achieving the objectives set forthem.

2.As seen in the previous subsection, the efficiency is an indicator that is obtained by

reporting the outcome effects to the efforts made. The efficiency of public expenses implies arelation between the economical and social effects resulted from implementing a program and

the effort made to finance that program. The effectiveness is the indicator given by the ratio between the result obtained and the one programmed to achieve. Ulrike Mandl, Adriaan Dierx and Fabienne Ilzkovitz in the paper "The effectiveness and

efficiency of public spending" indicate that the efficiency and effectiveness analysis is based onthe relationship between the inputs (entries), the outputs (results) and the outcomes (effects).

3.The efficiency of government spending has become one of the key issues in public

finance. In the advanced economies and many transition countries, higher efficiency of spendingseems to be the only way to avoid that public services are squeezed out between the opposingforces of age-related expenditure and rising tax competition. government efficiency at theaggregate level has thus become the subject of a rapidly growing literature, including keycontributions by Gupta and Verhoeven (2001), Tanzi and Schuknecht (1997, 2000), and Afonsoet al. (2005).

These studies typically measure public sector efficiency by relating governmentexpenditure to socio-economic indicators that are assumed to be targeted by public spending,such as education enrolment ratios or infant mortality; the results of their cross-countryexaminations suggest substantial efficiency differences between countries, irrespective of theirincome level.

It is only logical that the more recent literature has started to examine the determinants ofthese efficiency differences: Afonso and Aubyn (2006) examine the differences in the efficiencyof education spending in the OECD and find that income levels and parents education explain alarge part of the variation. Afonso et al. (2006) examine public sector efficiency in the newmember states of the European Union and conclude that security of property rights, income level,competence of the civil service, and the populations education level affect efficiency.

4.The efficiency of public spending is the subject of a rapidly growing literature . Tanzi

and Schuknecht (1997 and 2000) explore the benefits from public spending in industrialcountries. Gupta and Verhoeven (2001) evaluate education spending in Africa. Afonso,Schuknecht, and Tanzi (2005) develop encompassing public sector performance and publicsector efficiency indicators and apply them to OECD countries. Afonso, Schuknecht, and Tanzi

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(2006) examine spending efficiency in the new member states of the European Union. Herreraand Pang (2005) explore the efficiency of public spending in a large set of developing countries.Several country case studies, such as Mattina and Gunnarsson (2006), complement these cross-country papers.Putnam (1993) and Gellner (1994) have argued that the degree of development of civil society

influences the effectiveness of the public sector: cooperation between citizens and theirformation of nonstate institutions enables them to exert more effective control over politiciansand bureaucrats.

5.Dictionary definitions of performance include such alternative terms as

accomplishment, achievement, realization, and fulfillment. Most of these terms have todo with the objective effect of public actions; but some relate to the subjective sense ofsatisfaction experienced as a result of ones action. Accordingly , performance may be defined interms of effort or in terms of results .

Benchmarking can yield additional benefits in the public sector by introducing a form ofcompetition into the sector. If the results are publicized and general recognition, promotions and

career opportunities of public sector managers are linked to the relative performance of theiroffices, divisions or ministries as demonstrated by benchmarking, it can be a powerful force forimprovement in the public sector.

Therefore, the possibility of contracting out certain public services or functions shouldrank near the top of the list of questions to be asked periodically in government organizations.However, contractingout is only one market-related mechanism to improve efficiency andeffectiveness. It is dealt here at length because of the need for a full understanding of the usesand limits of this mechanism in view of the increasing frequency of its introduction indeveloping countries.

Many studies have aimed at estimating the effects of public expenditure on economicgrowth. Empirical studies have yielded conflicting results: some support the hypothesis that arise in the share of public spending is associated with a decline in economic growth (Landau(1986) and Scully (1989)); others have found that public spending is associated positively witheconomic growth (Ram (1986)); and still other studies have found no significant relationship(Kormendi and Meguire (1985) and Diamond (1989)). Public expenditures were observed in onestudy to have no impact on growth in developed countries, but a positive impact in developingcountries (Sattar (1993)).

A number of studies have tested the effects of certain public expenditure components oneconomic growth. In general, these studies suggest that public sector consumption does not

promote economic growth Barro (1991), Grossman (1990), and Easterly and Rebelo (1993)). Anumber of studies have found a positive correlation between economic growth and variouseducation indicators or expenditures: primary and secondary levels of educational attainment(Barro (1991) and Easterly and Rebelo (1993)); the share of expenditures on education in totalexpenditure (Otani and Villanueva (1990)); and capital expenditures on education (Diamond(1989)). Other studies suggest indirect links between education and economic growth, forexample, through the linkage between education expenditures and private investment (Clementsand Levy (1994)).

Other strands of research have aimed at identifying the effect of household investments ineducation and health or public outlays on specific education and health services; these studies

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