The Efficiency of Educational Production: A Comparison of Denmark with Other OECD Countries

Denmark, Norway, New Zealand, Canada and the USA are the OECD countries that spend most on education, measured in relation to GDP. Focusing in particular on upper secondary education, this paper examines whether the heavy expenditure on education in Denmark is matched by high output
from the educational sector, both in terms of a large number of students enrolled in educational programmes and a high completion rate. The methodology used is to compare (benchmark) Denmark with a relevant group of countries and to calculate how much cheaper Denmark could teach the same number of students and maintain the same graduation/completion rates as today if the country could achieve the same level of cost effectiveness as its most efficient counterparts. Comparing Denmark to a group of the richest OECD countries reveals that potential savings lie between 12 and 34 percent. Figures that fall to between zero and nine percent when a comparison is
made between Denmark and other Northern European countries. On the input side, the slightly weaker academic level among young people in Denmark on completion of lower secondary education – as measured by the PISA scores of the various countries – goes some way to explain the higher costs of upper secondary education. On the output side, if earnings and levels of employment among those who complete their education are taken into account, then Denmark is in fact found to be efficient. However, this high level of efficiency has become less clear-cut in recent years, since expected earnings (multiplied by rate of employment) is currently falling in comparison with the expected earnings in the peer countries. This might be an indication that Denmark’s current position is not stable, unless the present situation is entirely attributable to the economic downturn in the wake of the financial crisis.