Performance Management and Cost-effectiveness of Public Services: Empirical Evidence from Dutch Municipalities

The performance of public organizations is one of the key topics in public administration research. Cost-effectiveness as a dimension of performance has hardly been studied in this literature, however. Many governments currently are cutting budgets on an unprecedented scale after the world-wide financial and economic crisis. Reducing budgets and at the same time safeguarding the level of essential public services as much as possible, requires thorough knowledge of cost effectiveness and its determinants. This paper tries to fill this gap. First, by introducing econometric methods to measure cost effectiveness, usually not considered in public administration research. Second, by relating cost effectiveness to variables proxing performance management practices.The model has been empirically estimated using data of around 75 Dutch municipalities on output, client satisfaction, cost and organizational structure in 2008 and 2009. The data relate to the subsector of administrative local services that providespassports, driving licenses and other legal documents. The dataset is created in the context of a recently developed research program on evidence-based public management in Dutch local government.