Efficiency and Input- and Output-Substitutability in English Higher Education 1996/97 to 2007/08: A Parametric Distance Function Approach

34 Pages Posted: 9 Nov 2010

See all articles by Jill Johnes

Jill Johnes

University of Huddersfield

Date Written: May 25, 2010

Abstract

HEIs will face tight fiscal constraints in the future. This paper uses random effects and stochastic frontier techniques to estimate an output distance function over the period 1997/97 to 2007/08 in order to investigate the efficiency of higher education institutions (HEIs) and to examine the opportunities for substitution between inputs. Mean efficiency across the whole sector is estimated to be 70%, and further investigation reveals that the pattern of production in the typical institution in the highest efficiency quartile is closest to the pattern of production of the average pre-1992 university. The Morishima elasticities calculated from the parameter estimates suggest that the main possibilities for substitution are out of undergraduates into other inputs and from administration into other inputs (except academic services). Opportunities for substitution are generally much more limited from postgraduate inputs, staff and academic services. A simple examination of the effects of merger activity reveals that it takes place amongst institutions which are typically performing at the same level as non-merging HEIs, and that it has beneficial effects in terms of efficiency.

Keywords: higher education, efficiency, stochastic frontier analysis, distance functions, Morishima elasticities

JEL Classification: I23, C01, C33, D24

Suggested Citation

Johnes, Jill, Efficiency and Input- and Output-Substitutability in English Higher Education 1996/97 to 2007/08: A Parametric Distance Function Approach (May 25, 2010). Available at SSRN: https://ssrn.com/abstract=1615512 or http://dx.doi.org/10.2139/ssrn.1615512

Jill Johnes (Contact Author)

University of Huddersfield ( email )

Queensgate
Huddersfield HD1 3DH
United Kingdom

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