Dare to Measure

Through its business policy the government is trying to improve the climate for businesses in the Netherlands. The policy is justified by market failures such as external effects, imperfect information and coordination defects. The cost of government intervention must not exceed the cost of the market failure, however. The government has a fairly large budget available for various measures and many companies are affected by its business policy, so it is important to assess how effective these various measures are.

In this report the Expert Working Group on Impact Measurement (Theeuwes Committee) systematically sets out the ways of evaluating the direct effect (output) of various measures taken by the Ministry of Economic Affairs. The question is what proportion of observed output can be attributed to the use of a policy tool. Evaluating effectiveness at the output level can be seen as the first step towards evaluating the eventual social and macroeconomic effects of a tool, the effects at outcome level. Measuring the outcome effects of policy tools is very difficult, however, because of the influence of exogenous factors such as business cycles and international economic trends.