Public Sector Contribution to Competitiveness

Conventional measures of competitiveness in terms of final prices shed little light on how those prices are affected by public expenditure. By taking productivity as a common factor to any index of competitiveness we propose to assess Italian Public Sector contribution by its productivity in public services provision. Integration of Data Envelopment Analysis with Principal Component Analysis provides a consistent methodology to face the problem of high dimensions, intrinsic to the multidimensional nature of public services provision and objectives. Results show a large territorial variability in Public Sector productivity and a significant differentiation in terms of both layers of government and type of services. This provides evidence to identify areas, services and tiers of government lacking efficiency and constituting a potential obstacle for growth. The Country's traditional North-South dichotomy is hardly confirmed, whereas an East-West division seems to be the emerging picture.