Estimation of cost efficiency of Australian universities

Jocelyn Horne, Baiding Hu*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

15 Citations (Scopus)

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.

Original languageEnglish
Pages (from-to)266-275
Number of pages10
JournalMathematics and Computers in Simulation
Volume78
Issue number2-3
DOIs
Publication statusPublished - Jul 2008

Keywords

  • Cost efficiency
  • Cost function
  • Panel data
  • Stochastic frontier analysis

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