Guide to the Measurement of Government Productivity

The measurement of government productivity poses a challenge for economists. The lack of a marketed output and the multidimensional nature of objectives for government agencies in particular make the measurement of productivity in government more difficult than in the business sector. This article by Andrew Hughes of the New South Wales Treasury in Australia provides a guide to the issue of productivity measurement in government. Hughes provides a non-technical overview of the different quantitative techniques that can be used to gauge government performance, including index number techniques such as partial factor productivity and total factor productivity; statistical techniques such as ordinary least squares and stochastic frontier analysis; and mathematical techniques such as data development analysis. He gives a number of examples to illustrate the use of these techniques. Hughes concludes that general government agencies have much to gain from the application of quantitative techniques to the measurement of their economic performance.