Application of Factor Analysis in Policy Decision

Abstract

Public policy is a major focus in the government agenda. To identify the factors that govern the implementation of different policy in public or private sectors, researchers may use certain advanced multivariate statistical techniques. One such tool is the factor analysis, which can be implemented to resolve varieties of policy-related research issues to an extent. Factor Analysis may provide useful inputs to decision makers to focus on a limited number of factors rather than a large number of parameters while making practically implementable policy. The factor analysis is a multivariate technique that is used to reduce the large number of variables into few underlying factors to explain the variability of the group characteristics. The factor analysis can also be used to develop a test battery for assessing group characteristics. This chapter deals with explaining factor analysis in detail along with explaining different situations where it can be used in the policy framework. Further, to clarify the functionality involved in factor analysis, a solved example related to policy issue is discussed by using the SPSS software.