Higher education institutions' costs and efficiency: taking the decomposition a further step

A multiproduct cost function is estimated for English higher education institutions using a panel of data from recent years. The panel approach allows estimation by means of a random parameter stochastic frontier model which provides considerable new insights in that it allows the impact on costs of inter-institutional differences in the cost function itself to be distinguished from inter-institutional differences in efficiency. The approach used here therefore resembles in some respects the non-parametric methods of efficiency evaluation. We report also on measures of average incremental cost of provision and on returns to scale and scope.

Input Substitutability in English Higher Education

This paper investigates input substitutability in English higher education and compares merging and non-merging institutions. A stochastic frontier translog output distance function is estimated using a thirteen-year panel of data for all institutions in England. Some differences between merging and non-merging institutions in labour and capital substitutability are revealed, and administrative input becomes an abundant resource for merged institutions. Policy implications are discussed

An analysis of costs in institutions of higher education in England

Cost functions are estimated, using both random effects and stochastic frontier methods, for institutions of higher education in England. The paper advances on the existing literature by employing finer disaggregation by subject, institution type, and location, and by introducing consideration of quality effects. The findings are that, amongst undergraduates, medical students are the most costly, and non-science students the least; amongst postgraduates, those on taught courses are costly, while research students are relatively inexpensive. Provision in London is found to be more costly than that elsewhere. Estimates of economies of scale and economies of scope vary according to the choice of estimating technique. The random effects model suggests that ray economies of scale and economies of scope are ubiquitous. The stochastic frontier model suggests some product-specific economies of scale in research, but diseconomies elsewhere, and product specific economies of scope in undergraduate science, but diseconomies elsewhere. This has implications for achieving any expansion in higher education.

Chief executive pay in UK higher education: the role of university performance

open accessRemuneration for chief executives in UK higher education—known as Vice Chancellors (VCs)—has been on an upward trend in recent years, and VCs have received criticism that their performance does not warrant such reward. We investigate the relationship between VC pay and performance (rooted in principal agent theory), taking into account an array of other possible determinants. Deriving measures of VC performance is difficult as VCs are agents for various principals, and each principal may be interested in a different aspect of performance. We consider three measures of VC performance here: managerial efficiency as measured by data envelopment analysis; performance in university rankings produced by the media; the financial stability of the university. We construct a comprehensive data set, covering academic years 2009/2010 to 2016/2017, a period of considerable change in the UK higher education sector including rapidly-rising undergraduate tuition fees. Our results show that, once other possible determinants of VC pay are taken into account, the main measure of performance which affects VC pay is the one based on media rankings. Thus the agents (VCs) appear to be rewarded for delivering against this performance benchmark which is likely to be of interest to a variety of principals. This result however varies by type of university suggesting that the labour market for VCs differs by mission group

Costs and efficiency in English higher education: An analysis using latent class stochastic frontier models

The purpose of this paper is to provide an in-depth study of the cost structure and efficiency of English higher education institutions (HEIs). We are particularly interested, given the change in the composition of the sector, in how costs structures and efficiency vary by mission group. Previous work has focussed on pre-determined mission groups; but that is not necessarily satisfactory as mission groups were often formed historically, and universities which may once have had similar missions may not necessarily have similar outlooks today. To this end we use a panel of data from the English higher education sector from 2002/03 to 2010/11 to estimate a cost function for English HEIs using the latent class variant of the stochastic frontier model. This allows us simultaneously to (i) identify clusters of institutions, based on what the data tell us, (ii) evaluate the parameters of the cost function for each cluster, thence evaluating also measures of economies of scope and of scale within each cluster, and (iii) measure the efficiency of each institution, both relative to other institutions in the same cluster and relative to all other institutions in the analysis