LSE CEP LSE
Centre for Economic Performance (CEP)

Public Sector Productivity

We know little about the determinants of public sector productivity compared to private sector productivity

We have launched an interdisciplinary initiative - The Governance, Leadership and Public Sector Performance - to rectify this focusing on education, health, and the police. (See also The Centre for the Economics of Education website). The health sector is an area of particular attention where we are investigating the impact of pay on the supply of nurses and the role of human resources in delivering a better quality of healthcare - and we are currently working on the role of management practices in the population of English hospital trusts.

We use the framework of 'motivated agents' as public sector worker place a particular value on the service of their job. We look particularly at the issues of regional and performance related pay. (See also PIEP - The Pay Inequalities and Economic Performance website).

Health

We have investigated the causes of the huge variation in the productivity and quality of hospitals. One factor appears to be the pay regulation system. Since nurse pay varies little between high cost areas (like London) and low cost areas (like the North East), it is unsurprising that London has much more serious problems in retaining high quality staff. We show that this leads to greater death rates in London and the South East. See:

"Can Pay Regulation Kill? Panel Data Evidence on the Effect of Labour Markets on Hospital Performance", Carol Propper and John Van Reenen, Journal of Political Economy, Vol. 118, no. 2

Non-Technical Report: Can pay regulation kill? Evidence from English hospital trusts, Carol Propper and John Van Reenen, Journal of Political Economy, Vol. 118, No. 2, 2010.

We are looking in detail at management practices in the public sector using our management survey tool developed at CEP. We have shown that greater competition between English public sector hospitals has improved management quality, efficiency and clinical outcomes. The management work is at http://cep.lse.ac.uk/pubs/download/dp0983.pdf and the more general work on looking at patient choice policy reforms is in CEP DP 988.

Generally this supports the policies pursued since the mid 2000s to increase competition between hospitals and expand patient choice. We discuss the implications of this work for the current controversies over NHS reforms in http://cep.lse.ac.uk/pubs/download/cp323.pdf

A summary of the progress of the NHS under the Labour years is contained in http://cep.lse.ac.uk/pubs/download/ea009.pdf

We have also collected international data on management in hospitals and schools. This work will be launched later this year. See http://cep.lse.ac.uk/_new/research/productivity/management.asp#WiP3 for more details.

Police and Crime

We have also been examining the role of ICT and organization in affecting productivity in the police force. See Information Technology, Organization, and Productivity in the Public Sector: Evidence from Police Departments.

Much of our research has looked at the effectiveness of the police and policing policy

  • on the effects of education on crime (see CEP DP 979);
  • on using the terrorist attacks to work out the effectiveness of policing (see CEP DP 852);
  • on the street crime initiative (see CEP DP 680)

Universities

We are also interested in the role of universities in affecting innovation and economic performance in the local area. See The Impact of Private Ownership, Incentives and Local Development Objectives on University Technology Transfer Performance.

An important issue is, of course, the appropriate incentives that scientists have to license their innovations. If the university offers little license income to the academics it is unsurprising that they will have little incentive to license. See Incentives and Invention in Universities.

For further information contact Stephan Seiler