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Estimation of cost efficiency of Australian universities

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  • Horne, Jocelyn
  • Hu, Baiding

Abstract

The purpose of this paper is to quantify the efficiency with which Australian universities utilise their teaching resources. The study estimates the cost efficiency of 36 universities over the period 1995–2002 using stochastic frontier analysis. The present study differs from previous cost and efficiency studies of Australian universities in two respects. First, it employs stochastic frontier analysis for the specification of a cost function for Australian universities which allows for the estimation of cost efficiency for each university under study. Second, a panel data set is utilised in the estimation of the cost function which enables not only comparisons of cost efficiency between universities but also an econometric testing of the assumption of an identical cost function for every university. The main finding is that universities are not operating efficiently as measured by cost efficiency and in relative terms. An efficiency ranking is derived and policy inferences are discussed.

Suggested Citation

  • Horne, Jocelyn & Hu, Baiding, 2008. "Estimation of cost efficiency of Australian universities," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 78(2), pages 266-275.
    • Handle: RePEc:eee:matcom:v:78:y:2008:i:2:p:266-275
    DOI: 10.1016/j.matcom.2008.01.018
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    3. Silva, Thiago Christiano & Tabak, Benjamin Miranda & Cajueiro, Daniel Oliveira & Dias, Marina Villas Boas, 2018. "Adequacy of deterministic and parametric frontiers to analyze the efficiency of Indian commercial banks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 506(C), pages 1016-1025.
    4. Angel García Correas & Manuel Larran Jorge, 2010. "Análisis de diferentes medidas de la eficiencia investigadora y factores explicativos en las universidades públicas españolas," Investigaciones de Economía de la Educación volume 5, in: María Jesús Mancebón-Torrubia & Domingo P. Ximénez-de-Embún & José María Gómez-Sancho & Gregorio Gim (ed.), Investigaciones de Economía de la Educación 5, edition 1, volume 5, chapter 36, pages 703-732, Asociación de Economía de la Educación.
    5. Fieger, Peter & Villano, Renato & Cooksey, Ray, 2015. "Efficiency of Australian TAFE and further education providers," MPRA Paper 64626, University Library of Munich, Germany.
    6. Gralka, Sabine, 2018. "Stochastic frontier analysis in higher education: A systematic review," CEPIE Working Papers 05/18, Technische Universität Dresden, Center of Public and International Economics (CEPIE).
    7. Fieger, Peter & Villano, Renato & Cooksey, Ray, 2015. "Two dimensional efficiency measurements in Australian TAFE Institutes," MPRA Paper 64625, University Library of Munich, Germany.
    8. Shukhrat Kholmuminov & Robert E Wright, 2017. "Cost efficiency analysis of public higher education institutions in Uzbekistan," Working Papers 1704, University of Strathclyde Business School, Department of Economics.
    9. Samira Foladi & Maghsud Solimanpur & Mustafa Jahangoshai Rezaee, 2020. "Inverse Dynamic Data Envelopment Analysis for Evaluating Faculties of University with Quasi-Fixed Inputs," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 148(1), pages 323-347, February.
    10. Thomas Bolli & Mehdi Farsi, 2015. "The dynamics of productivity in Swiss universities," Journal of Productivity Analysis, Springer, vol. 44(1), pages 21-38, August.
    11. Orosco Gavilán, Juan Carlos, 2023. "Measuring efficiency of Peruvian universities: a stochastic frontier analysis," DES - Working Papers. Statistics and Econometrics. WS 36250, Universidad Carlos III de Madrid. Departamento de Estadística.
    12. Marcel Clermont, 2016. "Effectiveness and efficiency of research in Germany over time: an analysis of German business schools between 2001 and 2009," Scientometrics, Springer;Akadémiai Kiadó, vol. 108(3), pages 1347-1381, September.

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    More about this item

    Keywords

    Cost efficiency; Stochastic frontier analysis; Cost function; Panel data;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • I20 - Health, Education, and Welfare - - Education - - - General

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