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Estimation of Cost Efficiency of Australian Universities

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Author Info
Jocelyn Horne () (Department of Economics, Macquarie University)
Baiding Hu (Department of Economics, Macquarie University)

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Abstract

The purpose of this paper is to quantify the efficiency with which Australian universities utilise their teaching resources. The study estimates the cost efficiency of 36 universities over the period 1995-2002 using stochastic frontier analysis. The present study differs from previous cost and efficiency studies of Australian universities in two respects. First, it employs stochastic frontier analysis for the specification of a cost function for Australian universities which allows for the estimation of cost efficiency for each university under study. Second, a panel data set is utilised in the estimation of the cost function which enables not only comparisons of cost efficiency between universities but also an econometric testing of the assumption of an identical cost function for every university. The main finding is that universities are not operating efficiently as measured by cost efficiency and in relative terms. An efficiency ranking is derived and policy inferences are discussed.

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File URL: http://www.econ.mq.edu.au/research/2005/revefficiency.pdf
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File Function: First Version, 2005
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Publisher Info
Paper provided by Macquarie University, Department of Economics in its series Research Papers with number 0502.

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Length: 21 pages.
Date of creation: Mar 2005
Date of revision:
Handle: RePEc:mac:wpaper:0502

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Postal: Sydney NSW 2109
Web page: http://www.econ.mq.edu.au/
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Related research
Keywords: Cost efficiency stochastic frontier analysis higher education

Find related papers by JEL classification:
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
I20 - Health, Education, and Welfare - - Education - - - General

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  1. Melville L. McMillan & Debasish Datta, 1998. "The Relative Efficiencies of Canadian Universities: A DEA Perspective," Canadian Public Policy, University of Toronto Press, vol. 24(4), pages 485-511, December. [Downloadable!] (restricted)
  2. Hay, Donald A & Liu, Guy S, 1997. "The Efficiency of Firms: What Difference Does Competition Make?," Economic Journal, Royal Economic Society, vol. 107(442), pages 597-617, May. [Downloadable!] (restricted)
  3. Abbott, M. & Doucouliagos, C., 2003. "The efficiency of Australian universities: a data envelopment analysis," Economics of Education Review, Elsevier, vol. 22(1), pages 89-97, February. [Downloadable!] (restricted)
  4. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November. [Downloadable!] (restricted)
  5. Bruce Chapman, 2001. "Australian Higher Education Financing: Issues for Reform," CEPR Discussion Papers 434, Centre for Economic Policy Research, Research School of Social Sciences, Australian National University. [Downloadable!]
  6. Lloyd, P J & Morgan, M H & Williams, R A, 1993. "Amalgamations of Universities: Are There Economies of Scale or Scope?," Applied Economics, Taylor and Francis Journals, vol. 25(8), pages 1081-92, August.
  7. Avkiran, Necmi K., 2001. "Investigating technical and scale efficiencies of Australian Universities through data envelopment analysis," Socio-Economic Planning Sciences, Elsevier, vol. 35(1), pages 57-80, March. [Downloadable!] (restricted)
  8. Throsby, C D, 1986. "Cost Functions for Australian Universities," Australian Economic Papers, Blackwell Publishing, vol. 25(47), pages 175-92, December.
  9. Cornwell, Christopher & Schmidt, Peter & Sickles, Robin C., 1990. "Production frontiers with cross-sectional and time-series variation in efficiency levels," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 185-200. [Downloadable!] (restricted)
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