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Costs and Efficiency of Higher Education Institutions in England: A DEA Analysis

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  • E Thanassoulis
  • M Kortelainen
  • G Johnes
  • J Johnes

Abstract

As student numbers in the UK's higher education sector have expanded substantially during the last 15 years, it has become increasingly important for government to understand the structure of costs in higher education, thus allowing it to evaluate the potential for expansion and associated cost implications. This study applies Data Envelopment Analysis (DEA) to higher education institutions (HEIs) in England in the period 2000/01-2002/03 to assess the cost structure and the performance of various HEI groups. The paper continues and complements an earlier study by Johnes, Johnes and Thanassoulis (forthcoming), who used parametric regression methods to analyse the same panel data. Interestingly, the DEA analysis provides estimates of subject-specific unit costs that are in the same ballpark as those provided by the parametric methods. We then extend the previous analysis by examining potential cost savings and output augmentations in different HEI groups using several different DEA models. The findings include a suggestion that substantial gains of the order of 20-27% are feasible if all potential savings are directed at raising student numbers so that each HEI exploits to the full not only operating and scale efficiency gains but also adjusts its student mix to maximise student numbers. Finally we use a Malmquist index approach to assess productivity change in UK HEIs. The results reveal that for a majority of HEIs productivity has actually decreased during the study period.

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Bibliographic Info

Paper provided by Lancaster University Management School, Economics Department in its series Working Papers with number 598827.

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Date of creation: 2009
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Handle: RePEc:lan:wpaper:598827

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  1. Fare, Rolf & Shawna Grosskopf & Mary Norris & Zhongyang Zhang, 1994. "Productivity Growth, Technical Progress, and Efficiency Change in Industrialized Countries," American Economic Review, American Economic Association, vol. 84(1), pages 66-83, March.
  2. Johnes, Geraint & Johnes, Jill, 2009. "Higher education institutions' costs and efficiency: Taking the decomposition a further step," Economics of Education Review, Elsevier, Elsevier, vol. 28(1), pages 107-113, February.
  3. A. T. Flegg & D. O. Allen & K. Field & T. W. Thurlow, 2004. "Measuring the efficiency of British universities: a multi-period data envelopment analysis," Education Economics, Taylor & Francis Journals, vol. 12(3), pages 231-249.
  4. Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, Elsevier, vol. 2(6), pages 429-444, November.
  5. Per Andersen & Niels Christian Petersen, 1993. "A Procedure for Ranking Efficient Units in Data Envelopment Analysis," Management Science, INFORMS, INFORMS, vol. 39(10), pages 1261-1264, October.
  6. Antreas Athanassopoulos & Estelle Shale, 1997. "Assessing the Comparative Efficiency of Higher Education Institutions in the UK by the Means of Data Envelopment Analysis," Education Economics, Taylor & Francis Journals, vol. 5(2), pages 117-134.
  7. R. D. Banker & A. Charnes & W. W. Cooper, 1984. "Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis," Management Science, INFORMS, INFORMS, vol. 30(9), pages 1078-1092, September.
  8. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, Elsevier, vol. 6(1), pages 21-37, July.
  9. E Thanassoulis & G Johnes & J Johnes, 2005. "An analysis of costs in institutions of higher education in England," Working Papers 566942, Lancaster University Management School, Economics Department.
  10. Timo Kuosmanen & Mika Kortelainen, 2012. "Stochastic non-smooth envelopment of data: semi-parametric frontier estimation subject to shape constraints," Journal of Productivity Analysis, Springer, Springer, vol. 38(1), pages 11-28, August.
  11. Thanassoulis, E., 1996. "A data envelopment analysis approach to clustering operating units for resource allocation purposes," Omega, Elsevier, vol. 24(4), pages 463-476, August.
  12. Tommaso Agasisti & Carlo Salerno, 2007. "Assessing the Cost Efficiency of Italian Universities," Education Economics, Taylor & Francis Journals, vol. 15(4), pages 455-471.
  13. Philip Andrew Stevens, 2005. "A Stochastic Frontier Analysis of English and Welsh Universities," Education Economics, Taylor & Francis Journals, vol. 13(4), pages 355-374.
  14. Verry, D W & Layard, P R G, 1975. "Cost Functions for University Teaching and Research," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 85(337), pages 55-74, March.
  15. Johnes, Jill & Johnes, Geraint, 1995. "Research funding and performance in U.K. University Departments of Economics: A frontier analysis," Economics of Education Review, Elsevier, Elsevier, vol. 14(3), pages 301-314, September.
  16. Emmanuel Thanssoulis, 1999. "Setting Achievement Targets for School Children," Education Economics, Taylor & Francis Journals, vol. 7(2), pages 101-119.
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Cited by:
  1. Vasile Burja, 2011. "Regional Disparities Of Agricultural Performance In Romania," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 1(13), pages 12.
  2. Mariana Cunha & Vera Rocha, 2012. "On the Efficiency of Public Higher Education Institutions in Portugal: An Exploratory Study," FEP Working Papers 468, Universidade do Porto, Faculdade de Economia do Porto.
  3. BERBEGAL MIRABENT, Jasmina & SOLÉ PARELLADA, Francesc, 2012. "What Are We Measuring When Evaluating Universities’ Efficiency?," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, Euro-American Association of Economic Development, vol. 12(3).
  4. Maria Olivares & Andrea Schenker-Wicki, 2012. "The Dynamics of Productivity in the Swiss and German University Sector: A Non-Parametric Analysis that Accounts for Heterogeneous Production," Working Papers 309, University of Zurich, Department of Business Administration (IBW).
  5. Jiro Nemoto & Noriko Furumatsu, 2014. "Scale and scope economies of Japanese private universities revisited with an input distance function approach," Journal of Productivity Analysis, Springer, Springer, vol. 41(2), pages 213-226, April.

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