Productivity and Welfare Performance in the Public Sector

The purpose of this chapter is to suggest a definition and a way to measure the performance of the public sector, or that of its main components. The approach is explicitly rooted in the principles of welfare and production economics. First the authors present what they call the “performance approach” to the public sector. They then move to the issue of measuring the productivity of some canonical components of the public sector (railways, transportation, waste collection, secondary education, and health care). In the third stage the authors try to assess the performance of the overall public sector. They argue that for such a level of aggregation, one should restrict the performance analysis to the outcomes and not relate it to the resources involved. As an illustration they evaluate the performance of the European welfare states and its evolution over time, using frontier techniques.