A Unified Productivity-Performance Approach, with an Application to Secondary Schools in the Netherlands

We introduce a novel and simple diagnostic tool to improve the performance of public services (e.g. in health, education, utilities and transportation). We propose a method to compute performance/productivity ratios, which can be applied as soon as data on production units' outcomes and resources are available. These ratios have an intuitive interpretation: values below unity indicate that better outcomes can be attained through weaker resource constraints (pointing at scarcity of resources) and, conversely, values above unity indicate that better outcomes can be achieved with the given resources (pointing at unexploited production capacity). We demonstrate the practical usefulness of our methodology through an application to secondary schools in the Netherlands. In this application, we also account for outlier behavior and environmental effects by using a robust nonparametric estimation method. Our empirical results indicate that in most cases schools' performance improvement is a matter of unexploited production capacity, while scarcity of resources is a lesser issue