The objective of this paper is to examine the efficiency of the public sector when it comes to labor market policy (LMP) in European Union (EU) countries. The primary aim is to provide a comprehensive evaluation of public services connected with the LMP from the viewpoint of the efficiency of public expenditure allocated for that purpose. The turning point for the European labor market was marked by the introduction of lockdown in 2020 due to the COVID–19 pandemic. The article’s overall aim is to evaluate the efficiency of EU labor markets before and during the pandemic and to ascertain the extent to which the volume of public services (their financial allocations) affects selected labor market indicators.
The efficiency of EU countries in 2019 and 2020 was evaluated by applying the Data Envelopment Analysis (DEA) method. The BCC (Banker, Charnes, Cooper) model was used in this study. The output‑oriented BCC model was selected as it seems adaptable to the specifics of the LMP. Microsoft Excel Solver was used for solving the DEA model, which is applied to working out linear optimization models. The efficiency of public expenditure was evaluated using data from Eurostat. A total of seven variables were used for the analysis; they comprised five variables as inputs (government expenditure on services by selected function and two uncontrolled inputs represented by job vacancy rate and GDP per capita) and two variables as outputs of selected labor market indicators (employment rate and unemployment rate <inverted indicator>). The cross‑country comparison was conducted in two dimensions – among individual EU countries and among a group of countries that represent different public administration traditions (i.e., Anglo‑Saxon, Continental European, South European, Scandinavian, Eastern European, and South‑Eastern European).
The study demonstrates that even though the Southern countries achieved the worst results in terms of labor market indicators, it is in contrast to the efficiency approach using DEA, where countries such as Portugal and Greece achieved full efficiency for both 2019 and 2020. The efficiency approach of the LMP for 2019 and 2020 indicates that there is a very good situation in Central and Eastern European countries. Full efficiency is also achieved by Cyprus, Malta, Sweden and Germany. The least efficient LMP is found in Belgium.
During the pandemic, most of the analyzed groups of countries improved their efficiency scores of public expenditure on LMP. The exceptions were groups of countries with the South European tradition and the Scandinavian tradition, where the measure of efficiency decreased slightly. This may demonstrate the effectiveness of the implemented public policy to counteract the negative effects of COVID–19 on the labor market.
The value added of this paper comes from the demonstration that the proposed methodology, using the DEA method, can be used to measure the efficiency of LMP at micro‑ and mezzo‑levels and to make cross‑country comparisons.
