Subjective Performance Evaluation in the Public Sector: Evidence from School Inspections

Abstract

Performance measurement in the public sector is largely based on objective metrics, which may be subject to gaming behaviour. This paper investigates a novel subjective performance evaluation system where independent inspectors visit schools at very short notice, publicly disclose their findings and sanction schools rated fail. First, I demonstrate that inspection ratings can aid in distinguishing between more and less effective schools, even after controlling for standard observed school characteristics. Second, exploiting a natural experiment, I show that a fail inspection leads to test score gains; at least some of these gains persist in the medium term. I find no evidence to suggest that fail schools are able to inflate test score performance by gaming the system. Oversight by inspectors may play an important role in mitigating such strategic behaviour.