New public management and municipal performance: Do NPM reforms boost performance?

Abstract

New Public Management (NPM) reforms have been adopted worldwide since the mid-1970s to improve government effectiveness and efficiency. The basic premise of NPM reforms is that market orientation and management focus in the public sector will enhance effectiveness and efficiency of service delivery (Christensen and Lægreid 2010). Although NPM reforms have existed for a quarter century, we still have limited understanding of whether NPM reforms fulfill their expectations. Most importantly, very few empirical studies have been conducted that actually assess the impact of NPM reforms on performance (Alonso, Clifton, and Díaz-Fuentes 2015, Dahlström, Nistotskaya, and Tyrberg 2016, Hammerschmid and Van de Walle 2011). This study helps fill this gap by examining the effect of different NPM-type reforms on municipal performance. In particular, we assess the impact of NPM reforms on three dimensions of municipal performance – gender equity, efficiency and effectiveness – by using a data set of 810 city-level Japanese municipalities. Findings show that municipalities’ overall effort to create NPM reforms is not associated with gender equity and effectiveness in revenue expansion. However, findings suggest that municipalities with a higher commitment to various NPM- type reforms are likely to operate with lower administrative overhead costs. Results also suggest that municipalities’ efforts supporting individual reform, including outsourcing and municipal assets and debt management reform, are associated with higher efficiency in overhead costs and increased revenues from selling municipal assets. This study tests the impacts of NPM-type reforms on municipal performance in an understudied Asian developed setting.