Measuring Baumol and Bowen Effects in Public Research Universities

Abstract:     
Using the coefficients estimated in our cost model we deconstruct real cost changes per student between 1987 and 2008 and between 2008 and 2010 into Baumol and Bowen effects. We find for every $1 in Baumol effects there are over $2 in Bowen effects. Tight revenue since 2008 reversed the previous decline in productivity and accelerated the trend in economizing on the use of tenure-track faculty. This behavior under loose and tight revenue constraints is consistent with Bowen’s Rule. The model suggests the optimal staffing ratio is approximately three tenure-track faculty members per full-time administrator, while the current average ratio is two full-time administrators for one faculty member.  

Number of Pages in PDF File: 38

Keywords: Cost functions, staffing patterns, agency problems, shared governance

JEL Classification: I23, I28

working papers series