Assessing Public Sector Efficiency: Issues and Methodologies

Abstract

Methodological issues relevant when assessing the efficiency of public units are discusses by Pedraja-Chaparro, Salinas-Jiménez and Smith with reference to non-parametric approaches. First they note that public sector activities usually are aimed at achieving various goals other than efficiency, and that often there is a trade-off among various objectives. Output from public sector units is usually not traded on the market and public sector units do not face competition and the threat of bankruptcy. Consequently, the techniques employed to estimate efficiency scores should adjust to take into account problems in the measurement of outputs and inputs and uncertainty as regards the technology. Given its flexibility, data envelopment analysis seems an appealing approach to be used when addressing public sector efficiency.