Productivity is generally defined as a measure of the amount of output generated per unit of input. In many countries, public sector productivity has been assumed to be zero in the national accounts. The output of the government sector has been measured as equal in value to the total value of inputs. This output=input convention has increasingly come under scrutiny in recent years. The challenge is to devise alternative estimates based on output measurement in a public sector context – where collective services are provided and where there is, in most instances, no market transaction in services provided to individuals (Boyle, 2006).
This report aims to provide a summary of approaches to defining and measuring public sector productivity. The first part of the paper begins with a review of international practices for a few national statistical institutes (NSIs) and Productivity Commissions where information was readily available from websites. This is followed by more general discussions of issues that impact on public sector productivity. We first consider the organisation of public sector production which could feed into measurement. This draws heavily on a report reviewing measurement for the police, undertaken by The Productivity Institute (TPI). We then consider the question of weighting of outputs and quality adjustments. Next, we look at approaches that are based on outcomes rather than outputs and how to incorporate preventative measures. The final part contains some recommendations for future research.