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The Growing Allocative Inefficiency of the U.S. Higher Education Sector

  • James D. Adams

    ()

    (Department of Economics, Rensselaer Polytechnic Institute, Troy, NY 12180-3590, USA)

  • J. Roger Clemmons

    (Institute for Child Health Policy, College of Medicine of the University of Florida)

This paper presents new evidence on research and teaching productivity in universities. The findings are based on a panel that covers 1981-1999 and includes 102 top U.S. universities. Faculty size grows at 0.6 percent per year, compared with growth of 4.9 percent in the industrial science and engineering workforce. Measured by papers and citations per researcher, productivity grows at 1.4-6.7 percent per year and productivity and its rate of growth are higher in private than public universities. Measured by baccalaureate and graduate degrees per teacher, teaching productivity grows at 0.8-1.1 percent per year and growth is faster in public than private universities. A decomposition analysis shows that growth in research productivity within universities exceeds overall growth. This is because research shares grow more rapidly in universities whose productivity grows less rapidly. Likewise the research share of public universities increases even though productivity grows less rapidly in public universities. Together these findings suggest that allocative efficiency of U.S. higher education declined during the late 20th century. Regression analysis of individual universities finds that R&D stock, endowment, and postdoctoral students increase research productivity, that the effect of nonfederal R&D stock is less, and that research is subject to decreasing returns. Since the nonfederal R&D share grows and is much higher in public universities, this could account for some of the rising allocative inefficiency. The evidence for decreasing returns in research, which are greater than in teaching, suggests limits on the ability of more efficient institutions to expand and implies that differences in the scale of the teaching function are the primary reason for differences in university size. Besides all this the data strongly hint at growing financial pressures on U.S. public universities.

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File URL: http://www.economics.rpi.edu/workingpapers/rpi0611.pdf
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Paper provided by Rensselaer Polytechnic Institute, Department of Economics in its series Rensselaer Working Papers in Economics with number 0611.

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Date of creation: May 2006
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Handle: RePEc:rpi:rpiwpe:0611
Contact details of provider: Web page: http://www.economics.rpi.edu/
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  1. Ronald G. Ehrenberg, 2002. "Studying Ourselves: The Academic Labor Market," NBER Working Papers 8965, National Bureau of Economic Research, Inc.
  2. Lucia Foster & John Haltiwanger & C.J. Krizan, 1998. "Aggregate Productivity Growth: Lessons from Microeconomic Evidence," NBER Working Papers 6803, National Bureau of Economic Research, Inc.
  3. John M. de Figueiredo & Brian S. Silverman, 2002. "Academic Earmarks and the Returns to Lobbying," NBER Working Papers 9064, National Bureau of Economic Research, Inc.
  4. James D. Adams, 2002. "Comparative localization of academic and industrial spillovers," Journal of Economic Geography, Oxford University Press, vol. 2(3), pages 253-278, July.
  5. Rothschild, Michael & White, Lawrence J, 1995. "The Analytics of the Pricing of Higher Education and Other Services in Which the Customers Are Inputs," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 573-86, June.
  6. Adam B. Jaffe & Manuel Trajtenberg, 2005. "Patents, Citations, and Innovations: A Window on the Knowledge Economy," MIT Press Books, The MIT Press, edition 1, volume 1, number 026260065x, June.
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