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Measuring effectiveness of production in the public sector
Affiliation:1. Department of Economics, University of Oslo, Norway;2. Norwegian Defence Research Establishment (FFI), Norway;1. Department of Business Administration, Alfred Lerner College of Business and Economics, University of Delaware, Newark, DE 19716, United States;2. Alfred Lerner College of Business and Economics, University of Delaware, Newark, DE 19716, United States;1. School of Management, Shanghai University, Shang Da Road 99, Shanghai 200444, China;2. Shanghai Automotive Industry Corporation (SAIC Motor) Group, Wei Hai Road 489, Shanghai 200041, China;1. Institute of Industrial Engineering, National Taiwan University, 1 Sec. 4, Roosevelt Road, Taipei 106, Taiwan, ROC;2. Department of Business Administration, National Taiwan University, 1 Sec. 4, Roosevelt Road, Taipei 106, Taiwan, ROC;1. École Polytechnique Fédérale de Lausanne, Odyssea 4.16, Station 5, CH-1015 Lausanne, Switzerland;2. IMD, Chemin de Bellerive 23, P.O. Box 915, CH-1001 Lausanne, Switzerland;1. HEC Paris, Department of Accounting and Management Control, 1 rue de la Liberation, 78350, Jouy-en-Josas, France;2. University of Innsbruck, Institute for Organization and Learning, Universitaetsstrasse 15, 6020, Innsbruck, Austria
Abstract:Key concepts in efficiency analyses are efficiency and effectiveness. Efficiency is popularly connected to ‘doing the things right’ and effectiveness to ‘doing the right things’. The paper elaborates upon the latter concept within a setting where resources are transformed into outputs under the control of a public provider, while outcomes with outputs as inputs represent higher social goals, but this production is outside the public provider׳s direct control. A new measure of overall preference effectiveness is introduced and its decomposition into output-oriented efficiency and output-mix efficiency is shown. The monumental task of getting the necessary information for calculating effectiveness is highlighted.
Keywords:Public sector  Outputs and outcomes  Factorially determined multi-output production  Overall preference effectiveness  Output mix efficiency
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