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

Abstract

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.

Keywords:

• higher education
• data envelopment analysis
• performance measurement
• productivity
• cost function

This paper draws on research carried out on behalf of the UK Department for Education and Skills, now Department for Innovation, Universities and Skills, DIUS. The views expressed in the paper are those of the authors and no representation is being made that they are necessarily shared by the DIUS.

This paper draws on research carried out on behalf of the UK Department for Education and Skills, now Department for Innovation, Universities and Skills, DIUS. The views expressed in the paper are those of the authors and no representation is being made that they are necessarily shared by the DIUS.