Drivers of efficiency in higher education in England
Creators: name: Papadimitriou, Maria
Publisher: name: Lancaster University
Year: 2018
Subjects: Efficiency
Higher education
DEA
SFA
Mergers

description: The context of this thesis explores efficiency measures in higher
      education (HE) in England. Measures of efficiency serve as a crucial link
      between the economic sustainability of the HE sector and the policymaking
      establishment. Given that the idea of efficient allocation of resources,
      in a period of tighter budget constraints, curtailed government funding
      and increasing competition for a greater share for research funding and
      number of students has such a powerful influence, the concept of
      efficiency becomes meaningful serving as a basis for decisions to improve
      resource allocation. Understanding the nature of efficiency aims to put in
      place a simpler and more efficient HE and research system in England that
      encourages competition and choice, enhances quality, and ensures greater
      accountability and value for money. 
      
      
      The thesis unfolds two main disciplines of technical and cost efficiency
      in HE in England. Therefore the research objectives discussed are driven
      upon that conceptualization of efficiency and provide further insights
      into first, the effects of merger activity on efficiency, and second on
      whether permanent or transient (in) efficiency dominates the English HE
      sector. Those topics are key aspects and critically important for both
      policy change and ongoing institutional and structural reform and as thus
      are explored in the lines of this thesis. 
      
      Regarding the first research objective on the potential effect of mergers
      on Higher Education Institutions’ (HEIs) efficiency, in a first stage
      analysis efficiency scores of English universities are derived for a
      17-year period using the frontier estimation method data envelopment
      analysis (DEA). A second stage analysis explores the effect of merger and
      other factors on efficiency. We find that mean efficiency for the sector
      has varied around 60 percent to 70 percent, but that the efficiency levels
      of the vast majority of individual HEIs are not significantly different
      from each other. Merged HEIs have efficiency which is 5 percentage points
      higher post-merger than non-merging HEIs holding all else constant;
      moreover the efficiency impact of merger comes within 2 years of the
      merger taking place. Of the other factors included in the second stage
      analysis, pre-1992 universities have lower efficiency than other types of
      institution. In addition, having a higher proportion of income from
      government sources is an incentive to greater efficiency. Finally, a
      sensitivity analysis was conducted which exposed the post-merger
      efficiency results to a different method assessment as a validation test
      of the proposed policy implications. The sensitivity analysis resulted in
      confirming the main findings of efficiency improvements in the units
      received the treatment of merger.
      
      
      Turning to the second research objective, a common weakness in most of the
      models dealing with efficiency is their deficiency to account for
      unobserved heterogeneity that finally lead to biased efficiency estimates.
      Most of the cost efficiency frontier models, focused either on the
      transient or on the persistent part of cost inefficiency, confounding firm
      effects (that are not part of inefficiency) with persistent inefficiency
      or blending persistent inefficiency with latent heterogeneity. However a
      decomposition of the two parts, persistent (long –term) and
      transient/residual (short-term) inefficiencies, provides an in-depth
      analysis of whether short term practises or more long term structural
      changes within colleges and universities affect the degree of cost
      efficiency in the English HE sector.
      
      
      This distinction seems to be further appealing to the policy makers as a
      regulatory asset that aims at improving the efficiency of the sector
      through incentive reforms. Hence, more recent developments in panel data
      allow a further appealing distinction in the cost efficiency of HEIs in
      which unobserved firm effects (firm heterogeneity) can be disentangled
      from time invariant and time varying inefficiency. Hence the purpose of
      this thesis is partly to assess the level of persistent and transient
      inefficiency in the English HE sector from 2008/09 to 2013/14 by using a
      four-way error component model (persistent and transient inefficiency,
      random firm effects and noise) and so as to retain the apparatus of
      statistical inference stemming from a generalised true random effects
      (GTRE) model based on maximum simulated likelihood (MSL) techniques.
      
      
      In order to provide evidence that the aforementioned method ameliorates
      the predicted power of the model we offer a comparative study through the
      fundamental models applied in the literature so far. Consequently,
      statistical inference will be attempted by countering the efficiency
      estimates of a GRTE model with a random effects (RE) model proposed by
      Pitt and Lee (1981), informative on the persistent part, and a true random
      effects model (TRE) proposed by Greene (2005a, 2005b), enlightening the
      transient part. Finally, omitted variables bias will be controlled by
      implementing a MGTRE model, minimizing the resulting heterogeneity bias. 
      
      The comparison reinforces the validity of the GTRE model since it captures
      every single component of inefficacy while heterogeneity is controlled.
      For the English HE inefficiency is considered as persistent since
      short-run efficiency estimates are proven to be higher than the long-run.
      This gives further rise for more comprehensive and structural changes
      rather than simple mechanisms for short-term cost savings.