Cost Structure of Italian Public Universities: An Empirical Analysis

Abstract

There are broad concerns in Italy about public sector efficiency. Within the public sector higher education (HE) has a major role, providing the economy with research outputs and graduates. Italian universities claim to have expanded teaching and research services to keep pace with the growth of the “knowledge society.” An important question is whether this expansion is benefiting the Italian HE sector. To address this issue, the cost structure of Italian university system is examined. A quadratic cost function is employed to test both the existence of efficiency linkages between teaching and research services and the presence of scale economies. These results are used to investigate the implications of a more specialized HE sector.

Notes

1. At the Lisbon Summit in March 2000, European Union leaders set out a new strategy, based on a consensus among Member States, to modernize Europe. This became known as the “Lisbon Strategy”. After initially moderate results, the Lisbon Strategy was simplified and relaunched in 2005. See http://ec.europa.eu

2. The was a concern about the formula for financing universities on the basis of their cost efficiency and rational allocation among Italian higher education institutions.

3. Johnes et al. (2005) introduce a third specific output produced by universities – the transfer of knowledge – but we don't consider it here.

4. We also use the number of graduates (GRAD) to gain a more complete picture of the costs.

5. This kind of measurement is not used because in the Italian university system there is no distinction – yet – between full‐time and part‐time students: all students in Italian universities are considered “full time.” The introduction of the distinction between “full time” and “part time” students is an objective of Ministry of Education and the National Evaluation Committee in the coming years.

6. We consider agriculture, architecture, biology, engineering, maths, physics, chemistry, and medical courses as scientific courses.

7. The dataset used for this paper is available upon request from the authors.

8. Ray economies and product‐specific economies of scale occur when the scale coefficient is greater than one.

9. Brinkman and Leslie provide a review of the literature up to 1986.