HEC Liège 2016 _ Research Seminar_ NPM reforms Esposito Gaeta

Justifying structural change in European public sectors: a cross-country empirical study of the contextual determinants of

the NPM reform rhetoric

Giuseppe Lucio Gaeta

Department of Human and Social Sciences, University of Naples

« L’Orientale »

Liège, 10/V/2016

Giovanni Esposito

Lentic, ULg-HEC

Outline of the presentation

• Research context

• Paper’s content and objectives

• Research question

• Motivation

• Theoretical framework

• Empirical analysis

– Data

– Methodology

• Results

• Conclusions

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Research context

• “The rise and fall of large NPM projects at the EU level : the case of TEN-T” (NON-FRIA funds, 2014-2017)

– The paradigm of NPM

– NPM in action

– Alternatives to NPM

• Agreement of cooperative exchange between LENTIC and UNO

– NPM and public sector reforms

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What is NPM?

• New Public Management - the term was coined in the late 1980s to denote a new stress on the importance of management in public service delivery, which often linked to doctrines of economic rationalism (Hood 1989, Pollitt 1993)

– The main idea of NPM paradigm for reforming national administrative systems was that if private-sector principles were used to manage public-sector organizations rather than rigid hierarchical bureaucracy, these organizations would work more efficiently

– a taken-for-granted sense of “naturalness” envelops the mainstream conception of NPM reforms considered to be “apolitical” (i.e. Scott Bushnell and Sallee, 1990; Hood, 1991), as well as the “natural” outcome of public sectors’ modernization process

• NPM reform movement has been more than a mere technical and apolitical framework to modernize old-style bureaucracies

– NPM has manifested itself in history as a political process driven by a powerful reform ideology (Fournier and Grey 2000; Christensen and Lægreid 2011)

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Paper’s content and objectives

• ESPOSITO G., GAETA G.L. and TRASCIANI G. (2016) “Administrative change in the EU: a cross-country empirical study on the contextual determinants of NPM reform rhetoric”, Annals of Public and Cooperative Economics (Forthcoming)

• Objective Unveiling the contextual determinants of national parties’ declared support to NPM-style reforms

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Research question

• Study of NPM ideology by the investigation of national parties’ declared support to NPM-style reforms

– Focus on national parties’ electoral rhetoric in support of NPM-style reforms electoral manifestos

– The paper focuses on the process of NPM reforms in the EU which intensified in the 1990s and studies the NPM reform rhetoric of national political parties

• Research question within which institutional, economic and political context have national European parties declared support to NPM-style reforms in their countries?

– Y : NPM reform rhetoric of European national parties

– X : contextual characteristics

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Motivation

• Gap-spotting research

– no empirical paper addressing this question while numerous theoretical contributions provide hints

• Empirical evidence of the patterns of diffusion of NPM values across the political manifestos of European parties

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Theoretical framework (1) • It is very difficult to define the concept of NPM and link specific policy

measures to it (Pollitt, 2007). Nevertheless,…

• …the concepts of economy, efficiency and effectiveness have played a central role in the rhetoric of NPM reformers who have advocated them by pursuing specific goals (Pollitt and Dan 2011)

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Economy

cost reduction achieved through cutting down public spending and

adopting competitive market arrangements

in public sector organizations (Hood, 1991; OECD, 1995;

Dunleavy et al., 2006)

Efficiency

ratio between inputs and outputs and can be improved

through policies of deregulation and tax-breaks, which will create

the conditions for highly competitive markets to develop in public sector economy (Hood, 1991; Hendriks and Tops, 1999,

2003; Clifton et al., 2011)

Effectiveness the degree to which the

outcomes match the original goals or objectives set for the

organization of program.

To be pursued by adopting professional managerial

hierarchies instead of unskilled bureaucratic hierarchies

(Martin, 1983; Pollitt, 1990; Hood 1991; Roberts, 2010)

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Theoretical framework (2)

NPs’ support for NPM-style reforms is likely to be positively correlated with countries’ per capita income

Hood (1991)

H2 NPs’ support for NPM-style reforms is likely to be positively correlated with countries’ fiscal stress and poor macroeconomic performance

Dunsire and Hood (1989); Hood (1995); Hendriks and Tops (1999, 2003)

NPs’ support for NPM-style reforms is likely to be negatively correlated with the decentralization of the administrative system.

OECD (2003, 2008)

H4 NPs’ support for NPM-style reforms is likely to be negatively correlated with government effectiveness in policy action.

Aucoin, 1990; Hood, 1995; Hughes, 2003; London, 2002; Pollitt and Bouckaert, 2000

Right-wing NPs’ support for NPM-style reforms is likely to be higher than left-wing one

Hood (1995)

Economic context

Institutional context

Political context

Empirical analysis: data (1)

14 European countries (Sweden, Denmark, Finland, Belgium, Netherlands,

Luxembourg, France, Italy, Spain, Greece, Portugal, Germany, Austria, Great

Britain, and Ireland)

14-year period that ranges from 1997 to 2011

the electoral years considered in this study are particularly interesting. Indeed, since

mid-1990s, Europe has taken the lead in opening markets, privatizing public assets

and removing state monopolies from many public services; between 1997 and 2011

the European Commission has released numerous directives aimed at transposing

the NPM model into some key areas of national public sectors: postal services (in

1997, 2002 and 2008), air transport (1997), rail transport (in 2001, 2004 and 2007),

electricity (in 1998 and 2004) and gas (in 1998 and 2004).

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How can we measure political parties’ support to NPM-style administrative

reforms?

The Comparative Manifesto Database (CMD - Budge et al., 2001; Klingemann et al., 2006)

collects data resulting from an in-depth examination of the electoral manifestos issued by

major political parties that took part in national elections in a wide set of countries and over

multiple years

One variable records how much part of each political manifesto considered is devoted to

discuss “the need for efficiency and economy in government and administration,

cutting down civil service, improving governmental procedures or making the

process of government and administration cheaper and more effective”

We assume that this variable is a proxy of parties’ willingness to propose NPM- style

administrative reforms

Values range between 0 and 1. Higher values indicate that NPM-style reforms represent a

salient feature of the electoral program released by the party under examination.


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On average NPs under scrutiny devoted 5% of their electoral programs to NPM High variability across countries and within countries Southern VS Northern European countries?

Average values observed at electoral moments

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NPs’ support for NPM-style reforms is likely to be positively correlated with countries’ per capita income

Hood (1991)

H2 NPs’ support for NPM-style reforms is likely to be positively correlated with countries’ fiscal stress and poor macroeconomic performance

Dunsire and Hood (1989); Hood (1995); Hendriks and Tops (1999, 2003)

NPs’ support for NPM-style reforms is likely to be negatively correlated with the decentralization of the administrative system.

OECD (2003, 2008)

H4 NPs’ support for NPM-style reforms is likely to be negatively correlated with government effectiveness in policy action.

Aucoin, 1990; Hood, 1995; Hughes, 2003; London, 2002; Pollitt and Bouckaert, 2000

Right-wing NPs’ support for NPM-style reforms is likely to be higher than left-wing one

Hood (1995)

Economic context


Political context

How can we measure these features of the economic, institutional and

political context?

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Economic context: GDP, fiscal stress and macro-economic performance

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Political context

Empirical analysis: methodology (1)

Regression analysis!

Data are treated as pooled cross-section data since building a panel dataset was not

possible due to the following three reasons: i) parties’ significantly change over time

(some simply disappear, others merge or change their name), ii) countries do not all

hold elections in the same year iii) national elections are not held annually.

Ordinary least square regression analysis with clustered standard errors at country

level in order to account for the within-state correlation among observations.

Country dummies and year dummies are also included among regressors

Covariates are considered at year t-1 in order to avoid reverse causality issues

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The bounded (0-1) nature of the dependent variable used in our empirical analysis might

bias the OLS results OLS predictions may fall outside the possible 0-1 interval and

the existence of a floor and a ceiling may determine non linearity or heteroscedasticity.

Alongside OLS, the regression coefficients were also estimated through:

- the Fractional logit model (FRACLOG - Papke and Wooldridge, 1996), which allows to

investigate both proportion dependent variables (Baum, 2008, p. 301);

- the Zero-inflated Beta regression model (ZIBETA) which is based on a logistic

regression for estimating the probability that the dependent variable equals 0 alongside a

Beta regression which is used in order to estimate values between 0 and 1.

Empirical analysis: methodology (1)

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Empirical analysis: results (1)

OLS estimates; coefficients and standard errors clustered at country level. Dependent

variable: saliency of NPM-related policies in parties’ electoral manifestos.

*** =p<0.001; ** = p<0.05;* = p<0.1.

Four specifications with different sets of covariates

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(H1) national parties’ support for NPM-style reforms is likely to be positively correlated

with the countries’ per capita income. PARTIAL SUPPORT

(H2) NPs’ support for NPM-style reforms is likely to be positively correlated with countries’

fiscal stress and poor macroeconomic performance SUPPORT

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(H3) NPs’ support for NPM-style reforms is likely to be negatively correlated with

government effectiveness in policy action. SUPPORT

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(H4) Parties’ support for NPM-style reforms is likely to be negatively correlated with the

decentralization of the administrative system. PARTIAL SUPPORT

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(H5) Right-wing NPs’ support for NPM-style reforms is likely to be higher than left-

wing one STRONG SUPPORT


Fractional logit estimates; marginal effects and standard errors clustered at country level.

Dependent variable: saliency of NPM-related policies in parties’ electoral manifestos.

*** =p<0.001; ** = p<0.05;* = p<0.1.

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Estimates of Zero-Inflated Beta regression models; marginal effects and standard errors

clustered at country level. Dependent variable: saliency of NPM-related policies in parties’

electoral manifestos.

*** =p<0.001; ** = p<0.05;* = p<0.1.

Results

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Economic context

NPs have adopted the NPM reform rhetoric in a context of increasing per-capita income levels and fiscal stress


NPM reform rhetoric has been adopted by parties operating in public sectors characterized by centralised administrative structures and under national governments with ineffective policy actions

Political context

NPs ideological support for NPM-style reforms has spread across EU MSs mainly due to the political commitment of right-wing forces

This analysis allows to measure robust ceteris paribus correlations between our dependent variable and our set of covariates but the identification of any causal link is questionable

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Robustness checks

Sample restrictions in order to avoid the risk of results highly dependent from the

inclusion of NPs from one specific country stable results

Conclusion

This study has thrown light on the spread of the NPM political rhetoric across the

European countries and has provided empirical evidence about the patterns of

diffusion of NPM values across the national parties’ electoral manifestos.

The econometric model developed in this paper should be subjected to further

investigation. First of all, the period under empirical examination should be extended

and more covariates should be included in the analysis.

This paper has investigated NPM as a form of electoral supply responding to a specific

configuration of political, economic and institutional contexts. It would be interesting

to investigate how the electoral demand – i.e. citizens’ opinion – has reacted to specific

reform plans adopted on the wake of the NPM parties’ propaganda documented in

this study

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Thank you !

Giuseppe Lucio Gaeta Department of Human and Social Sciences

University of Naples L’Orientale (Italy)

[email protected]

Giovanni Esposito

Lentic, ULg-HEC

[email protected]

Documents

HEC Liège 2016 _ Research Seminar_ NPM reforms Esposito Gaeta