Does it Pay Off to Incentivize Universities?

25 Pages Posted: 24 Jan 2014

See all articles by Claudia Burgard

Claudia Burgard

University of Dortmund, Ruhr Graduate School in Economics - Department of Economics,

Barbara S. Grave

Rhine-Westphalia Institute for Economic Research (RWI-Essen)

Date Written: December 2, 2013

Abstract

This paper analyzes the effect of the introduction of performance-related funding in the German university sector. Starting in the 1990's, the federal states of Germany introduced incentive-based funding systems in order to increase universities' performance and efficiency. We estimate the effects of this reform on four common outcome indicators of the funding models: The number of students and graduates, which are supposed to measure teaching performance, and the number of PhD graduates and the amount of third-party funds, which quantify research output. Using a difference-in-differences estimator, our results suggest that for increasing the outcomes in teaching, a weak incentive is sufficient while the research outputs are only affected if the incentive is strong enough. We further identify different responses by university types, which shows that the results are mainly driven by technical colleges. According to our findings, it is crucial to design the funding models carefully to provide the “right” incentives and hence to achieve the underlying goal of the reform.

Keywords: higher education funding; financial incentives; policy evaluation; difference-in-differences

JEL Classification: D04, I23, O31

Suggested Citation

Burgard, Claudia and Grave, Barbara S., Does it Pay Off to Incentivize Universities? (December 2, 2013). Ruhr Economic Paper No. 457, Available at SSRN: https://ssrn.com/abstract=2383833 or http://dx.doi.org/10.2139/ssrn.2383833

Claudia Burgard (Contact Author)

University of Dortmund, Ruhr Graduate School in Economics - Department of Economics, ( email )

Hohenzollernstr. 1-3
Essen, NRW 45128
Germany

Barbara S. Grave

Rhine-Westphalia Institute for Economic Research (RWI-Essen) ( email )

Hohenzollernstr. 1-3
Essen, 45128
Germany

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
18
Abstract Views
258
PlumX Metrics