Costs and efficiency of higher education institutions in England: a DEA analysis

• Published in: The Journal of the Operational Research Society Vol. 62; no. 7; pp. 1282 - 1297
• Main Authors: Thanassoulis, E, Kortelainen, M, Johnes, G, Johnes, J
• Format: Journal Article
• Language: English
• Published: London Taylor & Francis 01.07.2011; Palgrave Macmillan; Palgrave Macmillan UK; Taylor & Francis Ltd
• Subjects: Applied sciences; Business and Management; Case-oriented Paper; Case-oriented Papers; Colleges; Colleges & universities; Cost control; Cost efficiency; Cost estimates; cost function; Costs; Data envelopment analysis; Decision theory. Utility theory; Econometrics; Economies of scale; Efficiency; Efficiency metrics; Exact sciences and technology; General aspects; Higher education; Inventory control, production control. Distribution; Linear programming; Management; Mathematics; Medical schools; Noise; Nonparametric inference; Nursing students; Occupational training. Personnel. Work management; Operational research and scientific management; Operational research. Management science; Operations research; Operations Research/Decision Theory; performance measurement; Probability and statistics; Productive efficiency; Productivity; Sciences and techniques of general use; Statistics; Studies; Unit costs; Universities; United Kingdom > UK; England; cost function; higher education; productivity; data envelopment analysis; performance measurement; Performance evaluation; Parametric method; Productivity; Costs; Return to scale; Higher education; Non parametric estimation; Cost function; Data envelopment analysis
• ISSN: 0160-5682; 1476-9360
• DOI: 10.1057/jors.2010.68

As student numbers in higher education in the UK have expanded during recent years, it has become increasingly important to understand its cost structure. This study applies Data Envelopment Analysis (DEA) to higher education institutions in England to assess their cost structure, efficiency and productivity. The paper complements an earlier study that used parametric methods to analyse the same panel data. Interestingly, DEA provides estimates of subject-specific unit costs that are in the same ballpark as those provided by the parametric methods. The paper then extends the previous analysis and finds that further student number increases of the order of 20-27% are feasible through exploiting operating and scale efficiency gains and also adjusting student mix. Finally the paper uses a Malmquist index approach to assess productivity change in the UK higher education. The results reveal that for a majority of institutions productivity has actually decreased during the study period.