Using data envelopment analysis to assess the efficiency of social security systems: the case of income protection in old age

As the number of pensioners in Europe rises relative to the number of people in employment, the gap between the contributions and the benefit levels increases, and consequently ensuring adequate pensions on a sustainable basis has become a major challenge. This study aims to explore the potential of using the Data Envelopment Analysis (DEA) technique in order to access the efficiency of the income protection in old age, one of the most important branches of Social Security. To this effect, we collected data from the 27 European Union Member States regarding this branch. Our results show important differences among the Member States and stress the importance of identifying best practices to achieve more adequate, sustainable and modernised pension systems. Our results also highlight the importance of using DEA as a decision support tool for policy makers.