Governments are responsible for a wide array of tasks, ranging from protecting borders to building hospitals and delivering passports. Governments’ expenditures by function reveal how much they spend on key areas, such as education, health, defence, social protection and public order and safety. Examining the levels of spending in these different functions helps to provide information about national priorities and policy choices, as well as preferences for delivery modes (i.e. fully public or a combination of public and private).
On average, in 2019, the largest portion of government resources in OECD countries was spent on social protection (13.3% of GDP), which includes old age pensions, sickness and disability benefits, and unemployment benefits. Finland (24%), France (23.9%) and Denmark (21.4%) spent the largest share of their GDP on social protection. Chile (5.9%), Korea (6.9%) and the United States (7.6%) spent the smallest share (Table 2.25).
Hospital services, outpatient services, appliances and equipment, and medical products, including vaccines, all form part of health care spending. This is the second largest spending category on average in OECD countries, at 7.9% of GDP. The United States (9.3%), Norway (8.7%) and Denmark (8.2%) spent the most in this category. However, even among countries with high spending levels there are stark differences. For example, while health care in Norway and Denmark is entirely public, only just over one-third of the US population are covered by a public health insurance scheme. At the other end of the spectrum, Switzerland (2.1%), Latvia (4.2%) and Chile (4.4%) spent the least on health care. In Switzerland health care is provided mainly through compulsory private insurance schemes.
General public services (e.g. public debt transactions, the functioning of the central executive and legislative bodies, and transfers between levels of government) accounted for 5.4% of GDP across OECD countries in 2019. Italy (7.5%), Greece (7.9%) and Finland (7.9%) spent the most on this function. Public debt transactions represented the largest component of this function for Italy and Greece, while general services made up over half of it in Finland. On average, OECD countries spend 5.1% of GDP on education and 3.9% on economic affairs. This last category encompasses subsidies to enterprises and economic sectors. Environmental protection is the category with the lowest level of spending, at 0.5% of GDP on average for OECD countries.
Between 2007 and 2019 public expenditures on social protection increased by 1.4 p.p. of GDP on average. The increase has been steepest in Finland (5 p.p.) and Spain (4.5 p.p.). Health spending in terms of GDP has also grown by 1.1 p.p. on average, with Norway (1.8 p.p.), Korea (1.6 p.p) and the United States (1.6 p.p.) experiencing the largest increases. Over the same period, spending on general public services decreased on average by 0.5 p.p. with Greece (3.7 p.p.) and Israel (3.4 p.p.) registering the steepest reduction in this area (Table 2.26).