Head teachers have called for the system to be slimmed
The government has agreed to an efficiency review of the exams system.
A report for England's exams regulator, the QCA, had said exams were costing schools and colleges in England, Wales and Northern Ireland £700m a year.
A head teachers' leader described the system as "bloated" and said it was a bad use of public funds.
Children's Secretary Ed Balls said it was important to ensure value for money. The Tories said the problem was of the government's own making.
The QCA report, compiled by Europe Economics, said: "Over time the system almost certainly has engendered inefficiency and in our view is likely to go on doing so.
"Unless action is taken, the burden on taxpayers will increase."
In a letter to the QCA (Qualifications and Curriculum Authority), Mr Balls said: "It is important to ensure value for money for the substantial amounts of public money that are spent on qualifications.
"I therefore accept the authority's recommendation that a full efficiency study of the qualifications market should be undertaken."
The efficiency review will fall to the new independent exam regulator, Ofqual, which began work only last week.
The general secretary of the Association of School and College Leaders, John Dunford, said: "It is vitally important that the government not only conducts a cost-benefit analysis of the current exam system but evaluates its effect on teaching and learning."
Shadow schools minister Nick Gibb said: "Ministers are announcing a review but it is their own polices which are driving up costs. They're making changes to Key Stage 2 tests which mean more expense and more teaching to the test.
"And earlier this week it was announced that GCSEs are now going to become modular. That will lead to pupils spending more time training for exams rather than learning and yet more costly re-sits."