Public sector agencies and value for money

The creation of autonomous government agencies to carry out specific policies has been a global trend in public administration in recent decades. The idea of this “agencification” is that enabling greater agency autonomy to carry out specific government activities would increase efficiency in the public sector, improve services for citizens and reduce political influence over policy implementation.

In a new article in the policy journal , Hertie School Assistant Professor of Public Administration Luciana Cingolani and Mihály Fazekas of the Central European University examine whether this practice has indeed delivered on its promise of increasing public administration performance.

In nearly forty years, there has been little reliable empirical evidence of a causal link between agencification and performance, the authors write.  Using unique administrative datasets that enable objective and granular measurements of reforms and their effects, and with the help of quasi-experimental methods, Cingolani and Fazekas tested the impact of agencification on value for money, competitiveness, and timeliness in Germany, Spain and the United Kingdom between 2006 and 2016.

They found that, on average, value for money improved by 2.8% or 1.7 billion euros over a decade, while outputs and processes changed only marginally. Organisations that only recently implemented such reforms barely improved their performance, while older agencies achieved substantial improvements.

“Our findings are particularly revealing in terms of the impact of agencification as a function of time. In line with the convincing—but scarce—prior evidence on the subject, we observe unequivocally that agencies with more years of experience in operating semiautonomously are indeed better at reaping the benefits of this (relative) independence,” the authors write. This finding may “…serve as an important warning for governments and practitioners pushing for quick visible results, or willing to revert reforms in accordance with (short) electoral cycles. Our findings suggest that there is a value in better understanding how time plays a role and may change the assessment of reform results.”

Find the full paper here.