Evaluating the economic value of a public service—the case of the Municipal Library of Prague

Abstract

To allocate public resources efficiently, governments need accurate information about the performance and effectiveness of public institutions. This paper presents a new approach to valuing public services, using the example of the Municipal Library of Prague (MLP). The contingent valuation method was used with a focus on library users’ willingness to pay for individual library services. The result is an overview of the perceived value of the MLP's services and its return on public investment. The proposed methodology could be used for other public services, such as healthcare or education.

Keywords:

• Contingent valuation
• economic value
• library services
• public libraries
• return on investment

Conclusion

The research provided values for individual library services and an extended investigation produced values for individual book titles. These values can be used as benchmarks for an approximate determination of the return on investment in similar libraries. Library managers and others therefore have the opportunity to perform an inter-library comparison and other necessary economic information for quality control.

A disadvantage of our approach is the need for a large number of respondents. In this study, we focused on book loans, which is a key public library service. A similar procedure could, however, be also used for other library services. So it would be possible to further refine the MLP's economic value. Future research might examine the transferability of our methodology, not only in terms of public library services but also in other areas of public services, such as healthcare and education. In terms of using the method in other public services, a decision would need to be made about whether services (usually the most important ones) should be evaluated immediately after consumption to limit lead-time bias, or whether a general CVM survey would be sufficient to make funding decisions. For example, the most important services provided by publicly-funded hospitals are reported to be outpatient department visits (including diagnostic exams and drugs), followed by inpatient days (Walraven, 1996).

Our unique approach enabled us to determine users’ perceived value of a public service. The method is not only suitable for valuing public libraries but has application more widely in the public sector. We recommend using the WTP approach for other public services, together with an investigation of whether there are substitutes for the public service available on the market.

Acknowledgements

We gratefully acknowledge the help provided by constructive comments of PMM's anonymous referees. This research received funding from the Czech Republic's Ministry of Culture: grant No. 163/MK-S 4743/2013 OULK.