Responses to fiscal crisis: The relevance of performance information in European governments

The Great Recession resulted in fiscal crises for governments across the Western world. Significant cuts in government programs were initiated as many governments scrambled to reduce their growing budget deficits. We are interested in how the European governments have reacted during the most recent crisis. In particular, our paper explores whether, as a result of the crisis, the relevance of performance information in organizational decision-making increased. Furthermore, we examine how other shifts in governmental decision-making processes − increased involvement of politicians, increased power of the Ministries of Finance, and increased centralization of decision-making, – influenced the shifts in the relevance of performance information for the public sector organizations. The theoretical part of the paper outlines the predictions about the impacts of fiscal crisis on the role of performance information in public sector decision-making and how shifts in other decision-making processes are likely to mediate that impact. In the empirical part of the paper, we use the survey of 7077 senior government officials in 19 European countries, undertaken within the framework of the COCOPS project, the largest comparative public management project undertaken in Europe so far. The survey aimed to explore public sector executives’ perceptions and experiences regarding public management practices, public sector reforms, and the impact of the fiscal crisis. Our analysis focuses primarily on a subset of questions dealing specifically with managers’ perceptions of how the fiscal crisis affected public administration within their organizations. The survey results were used to estimate an ordered logit regression model corresponding to our main hypotheses. We find that, in line with the predictions of rationalistic decision-making and principal-agent models, the increase in the relevance of performance information in organizational decision-making was positively associated with increased centralization, increased power of the Ministry of Finance and increased involvement of elected officials in organizational decision-making.