We consider the measurement of performance in the public sector in general, focussing
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authorities in particular. We will consider two methodologies that assess the
performance of local authorities in terms of the efficiency with which they provide
services and consider methods that allow us to account for exogenous influences on
performance, such as the socio-economic profile of the population served by the
authority. We find that although both methods’ results appear similar, the
implications for potential cost savings vary widely. Omitting to account for
background factors leads to an overstatement of the level of inefficiency and hence
the scope for reducing expenditure.
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