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Does it Pay Off to Incentivize Universities? – Performance Funding in the German Higher Education System Abstract: This paper analyzes the effect of the introduction of performance-related funding in the German university sector. Starting in the 1990‘s, the federal states of Germany introduced incentive-based funding systems in order to increase universities‘ performance and efficiency. We estimate the eff ects of this reform on four common outcome indicators of the funding models: The number of students and graduates, which are supposed to measure teaching performance, and the number of PhD graduates and the amount of third-party funds, which quantify research output. Using a difference-in-differences estimator, our results suggest that for increasing the outcomes in teaching, a weak incentive is sucient while the research outputs are only aected if the incentive is strong enough. We further identify different responses by university types, which shows that the results are mainly driven by technical colleges. According to our findings, it is crucial to design the funding models carefully to provide the “right” incentives and hence to achieve the underlying goal of the reform

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  • Claudia Burgard

    ()

  • Barbara S. Grave

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File URL: http://repec.rwi-essen.de/files/REP_13_457.pdf
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Paper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen in its series Ruhr Economic Papers with number 0457.

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Length: 25 pages
Date of creation: Dec 2013
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Handle: RePEc:rwi:repape:0457

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Related research

Keywords: Higher education funding; financial incentives; policy evaluation; difference-in-differences;

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  1. Geeta Kingdon & Francis Teal, 2004. "Does performance related pay for teachers improve student performance? Some evidence from India," Development and Comp Systems 0409009, EconWPA.
  2. Pedro S. Martins, 2009. "Individual Teacher Incentives, Student Achievement and Grade Inflation," Working Papers 29, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
  3. Randall Reback, 2006. "Teaching to the Rating: School Accountability and the Distribution of Student Achievement," Working Papers 0602, Barnard College, Department of Economics.
  4. Adele Atkinson & Simon Burgess & Bronwyn Croxson & Paul Gregg, 2004. "Evaluating the Impact of Performance-related Pay for Teachers in England," The Centre for Market and Public Organisation 04/113, Department of Economics, University of Bristol, UK.
  5. Simon Burgess & Carol Propper & Helen Slater & Deborah Wilson, 2005. "Who wins and who loses from school accountability? The distribution of educational gain in English secondary schools," The Centre for Market and Public Organisation 05/128, Department of Economics, University of Bristol, UK.
  6. Bauer, Thomas K. & Grave, Barbara S., 2011. "Performance-related Funding of Universities: Does More Competition Lead to Grade Inflation?," IZA Discussion Papers 6073, Institute for the Study of Labor (IZA).
  7. Jacob, Brian A., 2005. "Accountability, incentives and behavior: the impact of high-stakes testing in the Chicago Public Schools," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 761-796, June.
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