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New Estimates of Economies of Scale and Scope in Higher Education

Author

Listed:
  • David N. Laband

    () (Forest Policy Center, School of Forestry and Wildlife Sciences, Auburn University)

  • Bernard F. Lentz

    (Institutional Research and Analysis, University of Pennsylvania)

Abstract

Following Cohn, Rhine, and Santos (1989), we reestimate cost functions for 1492 private and 1450 public institutions of higher education (IHEs) in the United States, using data for fiscal year 1995–1996. Costs are modeled as a function of the level of production of three outputs: undergraduate education, graduate education, and externally funded research. We find that public and private IHEs are characterized by significantly different cost functions. At the sample means of the variables, we estimate that public and private IHEs enjoy both ray economies of scale and product-specific economies with respect to production of all three outputs. However, we also find that, at the sample means, both public and private institutions are characterized by diseconomies of scope in the production of these three outputs. Our findings suggest that both public and private IHEs could reduce their unit costs of operation by growing relative to the current mean levels of production.

Suggested Citation

  • 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.
  • Handle: RePEc:sej:ancoec:v:70:1:y:2003:p:172-183
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    Cited by:

    1. repec:spr:schmbr:v:18:y:2017:i:2:d:10.1007_s41464-017-0029-8 is not listed on IDEAS
    2. Hajargasht, Gholamreza & Coelli, Tim & Rao, D.S. Prasada, 2008. "A dual measure of economies of scope," Economics Letters, Elsevier, vol. 100(2), pages 185-188, August.
    3. Daraio, Cinzia & Bonaccorsi, Andrea & Simar, Léopold, 2015. "Efficiency and economies of scale and specialization in European universities: A directional distance approach," Journal of Informetrics, Elsevier, vol. 9(3), pages 430-448.
    4. repec:spr:scient:v:99:y:2014:i:2:d:10.1007_s11192-013-1207-1 is not listed on IDEAS
    5. repec:spr:reihed:v:58:y:2017:i:5:d:10.1007_s11162-016-9434-y is not listed on IDEAS
    6. T Agasisti & G Johnes, 2009. "Cost Structure, Efficiency and Heterogeneity in US Higher Education: An Empirical Analysis," Working Papers 599308, Lancaster University Management School, Economics Department.
    7. Liang-Cheng Zhang & Andrew C. Worthington, 2018. "Explaining Estimated Economies of Scale and Scope in Higher Education: A Meta-Regression Analysis," Research in Higher Education, Springer;Association for Institutional Research, vol. 59(2), pages 156-173, March.
    8. 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.
    9. Copenhagen Economics & KPMG, 2011. "VAT in the Public Sector and Exemptions in the Public Interest," Taxation Studies 0037, Directorate General Taxation and Customs Union, European Commission.
    10. repec:lan:wpaper:4358 is not listed on IDEAS
    11. Torben Schubert & Guoliang Yang, 2016. "Institutional change and the optimal size of universities," Scientometrics, Springer;Akadémiai Kiadó, vol. 108(3), pages 1129-1153, September.
    12. Andrea Bonaccorsi & Cinzia Daraio & Leopold Simar, 2014. "Efficiency and economies of scale and scope in European universities. A directional distance approach," DIAG Technical Reports 2014-08, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
    13. Tasso Brandt & Torben Schubert, 2014. "Is the university model an organizational necessity? Scale and agglomeration effects in science," Chapters,in: Knowledge, Diversity and Performance in European Higher Education, chapter 8, pages iii-iii Edward Elgar Publishing.
    14. Brandt, Tasso & Schubert, Torben, 2012. "Is the University Model an Organizational Necessity? Scale and Agglomeration Effects in Science," Papers in Innovation Studies 2012/1, Lund University, CIRCLE - Center for Innovation, Research and Competences in the Learning Economy.
    15. repec:spr:scient:v:103:y:2015:i:2:d:10.1007_s11192-015-1561-2 is not listed on IDEAS
    16. repec:lan:wpaper:4792 is not listed on IDEAS
    17. Webber, Douglas A., 2017. "Risk-sharing and student loan policy: Consequences for students and institutions," Economics of Education Review, Elsevier, vol. 57(C), pages 1-9.
    18. repec:spr:scient:v:94:y:2013:i:2:d:10.1007_s11192-012-0834-2 is not listed on IDEAS
    19. repec:spr:scient:v:112:y:2017:i:3:d:10.1007_s11192-017-2442-7 is not listed on IDEAS
    20. Longlong, Hou & Fengliang, Li & Weifang, Min, 2009. "Multi-product total cost functions for higher education: The case of Chinese research universities," Economics of Education Review, Elsevier, vol. 28(4), pages 505-511, August.
    21. repec:lan:wpaper:4487 is not listed on IDEAS
    22. Martin, Robert E., 2004. "Tuition discounting without tears," Economics of Education Review, Elsevier, vol. 23(2), pages 177-189, April.
    23. Copenhagen Economics, 2013. "VAT in the Public Sector and Exemptions in the Public Interest," Taxation Studies 0045, Directorate General Taxation and Customs Union, European Commission.
    24. Schubert , Torben, 2013. "Are there Scale Economies in Scientific Production? On the Topic of Locally Increasing Returns to Scale," Papers in Innovation Studies 2013/43, Lund University, CIRCLE - Center for Innovation, Research and Competences in the Learning Economy.
    25. G. Sav, 2011. "Panel Data Estimates of Public Higher Education Scale and Scope Economies," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 39(2), pages 143-153, June.

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