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Government funding incentives and study program capacities in public universities: theory and evidence

Author

Listed:
  • Jan Morten Dyrstad

    (Department of Economics, Norwegian University of Science and Technology)

  • Mia Marie Wallgren Sohlman

    (Department of Economics, Norwegian University of Science and Technology)

  • Tor Henrik Teigen

    (Department of Economics, Norwegian University of Science and Technology)

Abstract

Objectives aimed at increasing higher education productivity have stimulated use of performance-based funding (PBF) of higher education institutions both in Europe and the US. On theoretical grounds PBF is expected to speed-up study program capacity adjustments. We find from Norwegian data that study program capacities are adjusted favorably to productivity only if there is competition for students. Strengthened PBF does not affect the adjustments. Instead, admissions seem to adjust to secure full enrollment. The results provide an explanation of why very few positive effects of PBF in higher education are found in the literature. Given continued use of PBF to enhance productivity, a likely policy implication is to pay more attention to the overall allocation of study places to higher education institutions.

Suggested Citation

  • Jan Morten Dyrstad & Mia Marie Wallgren Sohlman & Tor Henrik Teigen, 2021. "Government funding incentives and study program capacities in public universities: theory and evidence," Working Paper Series 19021, Department of Economics, Norwegian University of Science and Technology.
    • Handle: RePEc:nst:samfok:19021
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    File URL: http://www.svt.ntnu.no/iso/WP/2021/3_21.pdf
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    References listed on IDEAS

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    Cited by:

    1. Falch, Torberg & Iversen, Jon Marius Vaag & Nyhus, Ole Henning & Strøm, Bjarne, 2022. "Quality measures in higher education: Norwegian evidence," Economics of Education Review, Elsevier, vol. 87(C).

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    More about this item

    Keywords

    Higher education funding; performance funding; study program dimensioning; incentives; regulation;
    All these keywords.

    JEL classification:

    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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