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Cost Structure, Efficiency and Heterogeneity in US Higher Education: An Empirical Analysis

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Author Info
Geraint Johnes
T Agasisti

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Abstract

We estimate a variety of models to evaluate costs in US higher education institutions. A novel feature of our approach involves the estimation of latent class and random parameter stochastic frontier models of the multiproduct cost function. This allows us fully to accommodate both the heterogeneity of institutions and the presence of technical inefficiencies. Our findings suggest that global economies could be achieved by effecting a reduction in the number of institutions providing undergraduate instruction, while increasing the number of institutions engaged in postgraduate activity.

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Paper provided by Lancaster University Management School, Economics Department in its series Working Papers with number 005930.

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Date of creation: 2009
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Handle: RePEc:lan:wpaper:005930

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Keywords: costs; efficiency; stochastic frontier; latent class; random parameter.;

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  1. Johnes, Geraint, 1997. "Costs and Industrial Structure in Contemporary British Higher Education," Economic Journal, Royal Economic Society, vol. 107(442), pages 727-37, May. [Downloadable!] (restricted)
  2. Lenton, Pamela, 2008. "The cost structure of higher education in further education colleges in England," Economics of Education Review, Elsevier, vol. 27(4), pages 471-482, August. [Downloadable!] (restricted)
    Other versions:
  3. Geraint Johnes & Manuel Salas-Velasco, 2007. "The Determinants Of Costs And Efficiencies Where Producers Are Heterogeneous: The Case Of Spanish Universities," Economics Bulletin, Economics Bulletin, vol. 4(15), pages 1-9. [Downloadable!]
  4. G. Thomas Sav, 2004. "Higher education costs and scale and scope economies," Applied Economics, Taylor and Francis Journals, vol. 36(6), pages 607-614, April. [Downloadable!] (restricted)
  5. Jondrow, James & Knox Lovell, C. A. & Materov, Ivan S. & Schmidt, Peter, 1982. "On the estimation of technical inefficiency in the stochastic frontier production function model," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 233-238, August. [Downloadable!] (restricted)
  6. Koshal, Rajindar K. & Koshal, Manjulika, 1999. "Economies of scale and scope in higher education: a case of comprehensive universities," Economics of Education Review, Elsevier, vol. 18(2), pages 269-277, April. [Downloadable!] (restricted)
  7. Philip Andrew Stevens, 2001. "The determinants of economic efficiency in English and Welsh universities," NIESR Discussion Papers 185, National Institute of Economic and Social Research. [Downloadable!]
  8. de Groot, Hans & McMahon, Walter W & Volkwein, J Fredericks, 1991. "The Cost Structure of American Research Universities," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 424-31, August. [Downloadable!] (restricted)
  9. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July. [Downloadable!] (restricted)
  10. David N. Laband & Bernard F. Lentz, 2003. "New Estimates of Economies of Scale and Scope in Higher Education," Southern Economic Journal, Southern Economic Association, vol. 70(1), pages 172-183, July.
  11. Greene, William, 2005. "Reconsidering heterogeneity in panel data estimators of the stochastic frontier model," Journal of Econometrics, Elsevier, vol. 126(2), pages 269-303, June. [Downloadable!] (restricted)
  12. Efthymios G. Tsionas, 2002. "Stochastic frontier models with random coefficients," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 17(2), pages 127-147. [Downloadable!]
  13. Johnes, Geraint & Johnes, Jill, 2009. "Higher education institutions' costs and efficiency: Taking the decomposition a further step," Economics of Education Review, Elsevier, vol. 28(1), pages 107-113, February. [Downloadable!] (restricted)
    Other versions:
  14. Rey, Elena Del, 2001. "Teaching versus Research: A Model of State University Competition," Journal of Urban Economics, Elsevier, vol. 49(2), pages 356-373, March. [Downloadable!] (restricted)
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  15. Luis Orea & Subal C. Kumbhakar, 2004. "Efficiency measurement using a latent class stochastic frontier model," Empirical Economics, Springer, vol. 29(1), pages 169-183, January. [Downloadable!] (restricted)
  16. Izadi, Hooshang & Johnes, Geraint & Oskrochi, Reza & Crouchley, Robert, 2002. "Stochastic frontier estimation of a CES cost function: the case of higher education in Britain," Economics of Education Review, Elsevier, vol. 21(1), pages 63-71, February. [Downloadable!] (restricted)
  17. Geraint Johnes, 2004. "A Fourth Desideratum: The CES Cost Function and the Sustainable Configuration of Multiproduct Firms," Bulletin of Economic Research, Blackwell Publishing, vol. 56(4), pages 329-332, October. [Downloadable!] (restricted)
  18. De Fraja, Gianni & Valbonesi, Paola, 2008. "The Design of the University System," CEPR Discussion Papers 7038, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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