The Centre for Market and Public Organisation (CMPO) at the University of Bristol conducts research on the general theme of ‘modernising government’. 

Projects fall into four broad areas: market organisation and regulation, especially of the privatised utilities; incentives in organisations, notably team-based pay in the public sector; competition in the provision of health care and education; and welfare reform and public sector delivery, including pensions and poverty.

The latest research findings from the Centre are summarised in the Spring 2004 issue of the CMPO bulletin:

• Ethnic segregation in English schools
• Competition law in the media: the likely impact of Ofcom
• Incentive pay for civil servants improves performance
• Hospital mergers raise prices: American lessons for UK foundation hospitals

Ethnic segregation in English schools

English schoolchildren from different ethnic backgrounds are more segregated in their school playgrounds than in the neighbourhoods where they live, according to new research by Professor Simon Burgess and Dr Deborah Wilson of CMPO. 

The researchers used data from the 2001 Annual Schools Census and the 2001 Population Census to create a measure of ethnic segregation that captures the evenness of spread of pupils across schools and neighbourhoods within a particular geographical area.  For example, if 20% of the school population of a local education authority (LEA) was of Indian ethnic origin, there would be no segregation if 20% of the pupils in each school in that LEA are of Indian ethnic origin; that is, if there was an even spread of that group across all the schools. The more uneven the distribution, the higher the degree of segregation.

The researchers found that:

• levels of segregation were generally high for the two main minority groups, those of South Asian ethnic origin and those of black heritage.  In the average LEA it was found that about half the members of these groups would have to move school in order to achieve an even spread.
• there was substantial variation in the levels of segregation experienced in different areas of England
• South Asians generally experienced higher levels of segregation than their black peers
• in places where black pupils are relatively numerous, they tend to be less segregated than in places where they are fewer. The reverse is true for South Asian pupils: in places where they form a larger proportion of the student body, there tends to be higher segregation.
• For both South Asian and black students, school segregation is higher than residential segregation in areas in which they are more numerous (generally some of the more densely populated, urban areas of England). This suggests that there is a loosening of the relationship between school and residential segregation in areas where there is more school choice.

Competition law in the media: the likely impact of Ofcom

Ofcom, the new single regulator for telecoms, TV and radio is likely to have a big impact on the culture of media companies such as BSkyB and the BBC, according to new research by Paul Grout, Professor of Political Economy at CMPO.

Ofcom was created in December 2003, replacing five regulatory bodies: the Broadcasting Standards Commission, the Independent Television Commission, the Radio Authority, the Radiocommunications Agency and Oftel (the Office of Telecoms).  Its brief ranges from standard economic issues to the policing of standards of taste and decency.

However, instead of streamlining and reducing regulatory controls, the creation of Ofcom has resulted in an enormous rise in regulatory duties and functions: from 128 under the previous five regulators to 263 under Ofcom, more than double its predecessors’ obligations.

Of particular significance are the implications of the new regulatory body for competition policy.  The Communications Act that created Ofcom has also liberalised ownership rules in the media, which suggests that there will be considerable merger activity in the future.  But even in the absence of ownership changes, there is likely to be a great deal of activity in the sector around competition issues with particular focus on the three major players – BT, BSkyB, BT and the BBC – and their interaction with others in the industry.

Incentive pay for civil servants improves performance

Team-based incentive schemes for public sector workers have a positive impact on their performance, according to new research conducted by Simon Burgess, Carol Propper, Marisa Ratto and Emma Tominey of the CMPO.

The study examined the impact of a team-based performance-related pay scheme piloted in 17 out of the 90 districts in the UK’s network of Jobcentre Plus offices between April 2002 and March 2003.  Unlike an individual performance pay scheme, such team-based schemes set a target collectively for a group of workers and everyone receives a bonus if the target is met.

The UK’s network of Jobcentre Plus offices has two main roles: to help place job seekers in work and to administer benefits.  Staff in offices where the incentive scheme was piloted were found to have increased the number of job seekers they placed in work by 11%.  

But the researchers warn that such schemes need to be carefully designed, particularly in how the team is defined.  In general, the smaller the team, the more powerful the incentive effect.  The incentive effect was found to decrease with the number of offices per district and this negative effect had far greater magnitude in large offices. 

Hospital mergers raise prices: American lessons for UK foundation hospitals

Hospital mergers can raise the price of healthcare by as much as 58%, regardless of whether they are ‘for profit’ or ‘not-for-profit’, according to new research on such mergers in the United States.

This has important implications for England’s new Foundation Hospitals, which, like two thirds of US hospitals, will operate as ‘not-for-profits’, and which may well seek to merge with each other to reduce competitive pressures.

CMPO Associate, Professor Martin Gaynor of Carnegie Mellon University and Professor Carol Propper, Director of CMPO, discuss the implications of this finding for England’s new Foundation Hospitals and argue that the Department of Health needs to consider setting clear regulatory guidelines for mergers sooner rather than later: otherwise, the benefits of healthy competition may be lost before they are even reaped.