Improving the use of empirical evidence to increase returns on public expenditure and investments

Research conducted at LSE has affected local and national economic growth policies, particularly through the development and implementation of improved governmental appraisal and impact evaluation methods. Impact on specific policies and expenditure can be demonstrated at supra-national level for the EU and at national and local levels for the UK. The work has been especially influential in the areas of business support, transport investment, and the development of local economic and industrial strategies. Its direct influence on policy design and decision-making has delivered important knock-on impacts on the value for money of public expenditure.

 

Issue

Understanding the determinants of local economic performance provides crucial guidance for investment intended to improve local and national economic growth. The work has helped address concerns about appraisal and evaluation processes outlined in academic work and in the EU and UK Government reports, including the 2006 Eddington transport study and the National Audit Office Review of Evaluation in Government, published in 2013.

 

Approach

LSE researchers have developed ways to strengthen both pre-investment appraisal (e.g. of transport) and post-investment evaluation (e.g. of business support). Underpinning work focuses on understanding the causes of spatial disparities and developing and applying: (i) appraisal techniques that better capture the wider economic impacts of investments; and (ii) approaches to impact evaluation that use counterfactual methods to more clearly attribute economic outcomes to a specific policy.

 

Impact

The LSE-led research outlined above has supported better-informed policy design and decision-making in local growth. It has encouraged reduced reliance on anecdotal and case study-based evidence alone, and facilitated policymakers’ greater use of quantitative data and the findings of econometric analysis and impact evaluations.

On a supranational level, the impact evaluation by the researchers of the UK Regional Selective Assistance Scheme directly influenced changes made by the European Commission Directorate-General for Competition (DG COMP) to regional aid eligibility rules on state aid to large firms.

On a national level, research by the team has informed the cost-benefit analysis (CBA) methodology used by the UK Department for Transport (DfT) and Transport Scotland. Insights published have had direct input in the methods used by transport planners to account for the potential wider impacts of transport projects.

At local level, What Works Centre for Local Economic Growth (WWG) has had a significant impact on the evaluation methods and activities of local authorities, for example Liverpool City Region Combined Authority (CA). In 2018, the CA took a decision not to conduct a complex meta-evaluation of their devolution deal. The WWG instead suggested that the CA should identify aspects of the devolution deal for which in-depth evaluation would be a cost-effective and productive endeavour. The focus on “meaningful” evaluation has informed interventions, fund allocation, and scheme prioritisation across the CA.

 

More information

• Read the full impact case study in the REF21 database

Institution: London School of Economics and Political Science

Researchers: Professor Stephen Gibbons, Professor Henry Overman