External funding, efficiency and productivity growth in public research: the case of the Italian National Research Council

This paper presents an application of the Directional Output Distance Function (DODF) model to measure the internal performances of the Italian National Research Council (CNR). Research institutes are seen as Decision Making Units (DMUs) which produce two different kinds of scientific outputs using inputs. We consider some outputs more important from a scientific point of view than others, which we refer to as bad. Financial constraints, recently imposed by the government, do not allow the institutes to freely dispose of their output portfolio and bad outputs have to be produced in order to obtain external funds. Using the DODF framework it is possible to estimate the efect of fund cuts in terms of potential scientific products lost. By applying the Malmquist-Luenberger indexes we produce evidence on the trend of Total Factor Productivity (TFP) after the 2003 internal restructuring process. A comparison of results within the standard efficiency framework is provided and the big differences that emerge allow us to draw alternative conclusions on the recent evidence.