Productivity and efficiency of central government departments: a mixed-effect model applied to Dutch data in the period 2012-2019

Abstract

Central government aims to stimulate the efficiency and technical change of public organizations. However, government primarily focuses on the institutions that deliver final public services, but not on the policy making institutions. This article analyses the productivity of central government departments (CGDs). From bureaucratic theory we hypothesize that productivity of these CGDs are low. In order to measure efficiency and technical change we estimate an average cost function based on data of Dutch individual CGDs during the period 2012-2019. The dataset consists of data on various services provided, resource usage and efficiency determinants. The cost function is estimated by a mixed-effect non-linear least squares method. The outcomes show that there are large efficiency differences among CGDs. It is also striking that technical change of the CGDs is nonexistent over time, probably due to a lack of innovative behaviour, unwieldy bureaucracies and increasingly complex paperwork.

Keywords

• central government; productivity; cost efficiency; efficiency determinants; technical change; cost function; scaling property; bureaucracy