Higher Education Institutions' Costs and Efficiency: Taking the Decompostion a Further Step
Lancaster University Management School Working Paper
19 Pages Posted: 4 Nov 2005
Date Written: October 2005
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.
Keywords: stochastic frontier, random parameter models, costs, higher education
JEL Classification: C14, C23, C51, D20, I20
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