Measuring efficiency of macro systems : an application to millennium development goal attainment

At least part of the effort toward MDG attainment in the social sector could come from improvements in efficiency of delivery mechanisms. Hence, it is important to know which countries - or which regions within countries - are able to attain higher MDG outcomes even after controlling for resource inputs. This information can be useful for policymakers and enable a second-stage analysis of why is it that some are doing better than others. This paper reviews the methodology for measuring efficiency in macro systems using the health and education sectors as examples. A simpler characterization of efficiency that is less dependent on econometric specifications is introduced. As an example, this method of measuring efficiency is applied to assess health system outcomes at the district (kabupatam) level in Indonesia.