Analyzing the gap and efficiency in government spending: An empirical study using data envelopment analysis and panel data models

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Abstract

This study examines the issue of inefficiency and overspending in government expenditures, with a focus on how the size and composition of public spending affect economic growth. Prior studies have highlighted the relationship between government spending and economic growth (Bayrak, 2021; Ullah et al., 2024). The study aims to determine the optimal level of government expenditures and assess the efficiency of these expenditures. To achieve this, the study employs a panel data model and data envelopment analysis (DEA) methodology, utilizing data from 41 countries with structural similarities to Jordan, for the period 2010 to 2023. The methodology enables benchmarking Jordan’s fiscal performance against that of peer countries and identifying deviations from optimal spending levels. The results indicate that Jordan’s optimal government spending ratio averages around 28% of gross domestic product (GDP). Additionally, actual expenditures consistently exceed this level, indicating a negative budget deficit. Additionally, the Banker-Charnes-Cooper (BCC) model indicates that Jordan achieved 81% of the optimal efficiency level. This reflects the presence of financial waste and inefficiencies in government expenditures. This inefficiency is linked to a high share of non-productive expenditures such as wages and interest payments. The paper recommends that reforming the structure of public expenditure and reallocating resources toward high-return sectors is essential. These reforms are relevant for improving the efficiency of government expenditures.

Keywords: Jordan, DEA, Panel Data, Expenditures, Government, Optimal

Authors’ individual contribution: Conceptualization — A.A.A.-M.; Methodology — A.A.A.-M.; Writing — Original Draft — A.A.A.-M., R.K.A.-S., and S.Y.A.F.; Writing — Review & Editing — A.A.A.-M., R.K.A.-S.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: H6, H50, H61

Received: 11.06.2025
Revised: 01.10.2025; 22.12.2025
Accepted: 23.01.2026
Published online: 27.01.2026

How to cite this paper: Al-Majali, A. A., Abu-Safi, R. K., & Al Freijat, S. Y. (2026). Analyzing the gap and efficiency in government spending: An empirical study using data envelopment analysis and panel data models. Journal of Governance and Regulation, 15(1), 195–206. https://doi.org/10.22495/jgrv15i1art18