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The differential effects of competitive funding on the production frontier and the efficiency of universities

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  • Bolli, Thomas
  • Olivares, Maria
  • Bonaccorsi, Andrea
  • Daraio, Cinzia
  • Aracil, Adela Garcia
  • Lepori, Benedetto

Abstract

European governments increasingly employ competitive university funding to improve performance in higher education. The framework that is developed in this paper suggests a donor-specific trade-off between fostering best performing universities and increasing university efficiency when introducing competitive funding in the university sector. We test this assertion based on a university-level panel dataset across eight European countries from 1994–2006. Estimating a simultaneous two-stage Stochastic Frontier Approach, we find that international public funds decrease the productivity of the best performing universities, which suggests a non-negligible effect because of the administrative burden induced by competitive funding. However, the competition for international public funds also disciplines universities as evidenced by a positive impact on efficiency. Conversely, tuition fees enhance the productivity of the best performing universities but increase the spread of universities with lower productivity, which suggests a strong sorting effect.

Suggested Citation

  • Bolli, Thomas & Olivares, Maria & Bonaccorsi, Andrea & Daraio, Cinzia & Aracil, Adela Garcia & Lepori, Benedetto, 2016. "The differential effects of competitive funding on the production frontier and the efficiency of universities," Economics of Education Review, Elsevier, vol. 52(C), pages 91-104.
    • Handle: RePEc:eee:ecoedu:v:52:y:2016:i:c:p:91-104
    DOI: 10.1016/j.econedurev.2016.01.007
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    15. Jan Morten Dyrstad & Mia Marie Wallgren Sohlman & Tor Henrik Teigen, 2021. "Government funding incentives and study program capacities in public universities: theory and evidence," Working Paper Series 19021, Department of Economics, Norwegian University of Science and Technology.
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    20. Orosco Gavilán, Juan Carlos & Lopes Moreira Da Veiga, María Helena & Wiper, Michael Peter, 2023. "Measuring efficiency of Peruvian universities: a stochastic frontier analysis," DES - Working Papers. Statistics and Econometrics. WS 36250, Universidad Carlos III de Madrid. Departamento de Estadística.
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    More about this item

    Keywords

    University; Third-party funding; Stochastic Frontier Analysis; Production frontier; Efficiency;
    All these keywords.

    JEL classification:

    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy

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