The Growing Allocative Inefficiency of the U.S. Higher Education Sector

43 Pages Posted: 20 Nov 2006 Last revised: 11 Nov 2013

See all articles by James D. Adams

James D. Adams

Dept of Economics, Rensselaer Polytechnic Institute; National Bureau of Economic Research (NBER)

Roger Clemmons

University of Florida - Institute for Child Health Policy

Date Written: November 2006

Abstract

This paper presents new evidence on research and teaching productivity in universities using a panel of 102 top U.S. schools during 1981-1999. Faculty employment grows at 0.6 percent per year, compared with growth of 4.9 percent in industrial researchers. Productivity growth per researcher is 1.4-6.7 percent and is higher in private universities. Productivity growth per teacher is 0.8-1.1 percent and is higher in public universities. Growth in research productivity within universities exceeds overall growth, because the research share grows in universities where productivity growth is less. This finding suggests that allocative efficiency of U.S. higher education declined during the late 20th century. R&D stock, endowment, and post-docs increase research productivity in universities, the effect of nonfederal R&D is less, and the returns to research are diminishing. Since the nonfederal R&D share grows and is higher in public schools, this may explain the rising inefficiency. Decreasing returns in research but not teaching suggest that most differences in university size are due to teaching.

Suggested Citation

Adams, James D. and Clemmons, J. Roger, The Growing Allocative Inefficiency of the U.S. Higher Education Sector (November 2006). NBER Working Paper No. w12683. Available at SSRN: https://ssrn.com/abstract=942978

James D. Adams (Contact Author)

Dept of Economics, Rensselaer Polytechnic Institute ( email )

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National Bureau of Economic Research (NBER) ( email )

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J. Roger Clemmons

University of Florida - Institute for Child Health Policy ( email )

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Gainesville, FL 32610-0147
United States

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