Cost efficiency – one size fits all? A university-level analysis of economies of scale and scope in Vietnamese higher education

ABSTRACT

Like other nations, Vietnam annually subsidies higher education via state budget to maintain academic operations of public institutions. However, the question of how to fairly and appropriately distribute state funding to public institutions is still challenging, therefore unfair distribution to some extent influence their cost efficiency. Using the quadratic cost function with random effects for a panel structure of 2011/12–2013/14, this paper aims to estimate economies of scale and scope of public universities and to seek for explaining whether the even application of standardized “one size fits all” policy in distributing public budget works or not when the cost analysis is stratified into rural and urban universities. The findings show that public universities are cost-inefficient in their performance and there are no economies of scale and scope in public universities. Even distribution of delivering state funding is more likely to be ineffective for public universities due to their different characteristics. Further, integrated teaching at various levels of higher education could be advantageous for rural universities but might not to be the case for their urban counterparts. In the end, policy implications for ameliorating the performance of public institutions are suggested.

KEYWORDS:

• Cost efficiency
• economies of scale
• economies of scope
• public university
• urban
• rural

Disclosure Statement

No potential conflict of interest was reported by the author.

Notes

1. Joint Circular 20/2014/TTLT–BGDDT–BTC–BLDTBXH on implementation of the tuition fee policy.

2. Decree 49/2010/ND-CP on tuition fees for higher education from 2010/11 to 2014/15 and Decree 86/2015/ND-CP on tuition fees for higher education from 2015/16 to 2020/21.

3. The exchange rate at 24/3/2019, $US1 = VND23,205.

4. Increasing returns to scale occurs when output increases by a larger proportion than the increase in inputs during the production process.

Additional information

Notes on contributors

Carolyn-Dung Thi Thanh Tran

Carolyn-Dung Thi Thanh Tran is Postgraduate Program Manager (Business) and Director of Scholarship of Learning and Teaching at International College of Management, Sydney, New South Wales, Australia. She is also an Adjunct Research Fellow in Business School, University of New England. She has written extensively on higher education and local government, especially on operational efficiency, municipality economies of scale and productivity. Recent publications consist of Local Government Studies, Public Administration Quarterly, Australian Journal of Public Administration, Public Finance and Management, Applied Economics, Asian Economic Journal, and International Transaction in Operational Journal.