Recent publications have concluded that the Open University is both more cost-effective and more “open” than conventional universities. In this paper the evidence for these claims is critically examined, and it is concluded that neither claim has been substantiated. An alternative technique, cost-effectiveness analysis, is proposed as a more appropriate way of evaluating the Open University. A rudimentary application of the technique to the cost structure of the OU indicates that there is a prima facie case for believing that its application would result in a substantial reduction in the Open University's costs.

Mythology in the Making: Is the Open University Really Cost-Effective?.

An increasing effort has been put into dealing with the question of time-series analysis regarding institutional efficiency, including in the area of higher education. Universities are important institutions for economies and societies and are expected to provide excellence as well as efficiency in their processes and outputs. This is reflected in the context of an increased global competitive environment by more refined international university rankings. Combining the two areas, this paper points towards a methodological challenge in comparing different ranking datasets for their use in a data envelopment analysis (DEA) Malmquist index time-series efficiency analysis, namely, index-based data compared to additive data. The problem is discussed in a theoretical framework and complemented with an empirical application: calculations for 70 European universities with budget and staff input data and different ranking output data for the timeframe of 2011–2016 show that there is no evidence for a specific index data problem. Important implications regarding university management and higher education policies are outlined. Efficiency improvements among the analyzed universities are significant but also unevenly distributed and not easy to obtain for individual institutions.

/pdf/the-index-number-problem-with-dea-insights-from-european-1iwaxs0796.pdf

The Index Number Problem with DEA: Insights from European University Efficiency Data

Few empirical studies have analyzed the return to distance higher education in different academic disciplines. This study used quantitative methods, data from a nationwide survey, and Mincerian earnings function to analyze the return to distance higher education among different disciplines in China’s labor market. Results were compared with the return to face-to-face higher education and showed that the returns to face-to-face higher education were higher than those to distance higher education. Returns to the disciplines of economics and management were at a high level in both face-to-face and distance education; returns to the disciplines of literature, as well as education and law, were at a low level in both face-to-face and distance education. The returns to the disciplines of science and engineering were higher in face-to-face education than in distance education. This paper proposes several recommendations. Adults who do not have higher education degrees should invest in distance higher education to obtain considerable monetary returns, particularly in the disciplines with higher returns such as management and economics. China’s distance education institutions should improve the quality of teaching in science and engineering education and find ways to provide high-quality experimental teaching practices. At the same time, they should scale back on instruction of literature, as well as education and law.

/pdf/empirical-analysis-of-return-to-distance-higher-education-in-2o4reyqw5c.pdf

Empirical Analysis of Return to Distance Higher Education in Different Disciplines

Sisyphus Revisited: Efficiency Developments in European Universities 2011-2016 According to Ranking and Budget Data.

The state-of-the-art of financial analysis-for academic units withi.a institutions of higher education is evaluated with attention directed to: how the cost of an academic unit is determined, how revenue is identified with academic units, how costs are analyzed, how revenues and expenditures are projected, and how the financial efficiency of an academic unit is evaluated. Based on the literature, it is suggested that: indirect as well as direct iosts need to be measured; cost has both fixed and variable elements n relation to the number of students or faculty in an academic unit; n some analytical models, the revevae attributable to an academic unit is measured; costs per student, per full-time equivalent faculty, and per class are measures of unit cost; level of study, method of instruction, and other factors are used to weight data about cost per student; the expected cost of an academic unit may be measured by determining its level of average faculty support and workload; and financial measures may yield important information, but the use of the information still requires discretion. Accounting for revenues of academic units is not as well developed as accounting for costs. Where actual revenue attributable to a unit is-not available in the accounts, some form of allocation system is used. Mathematical models, such as trend line analysis and, the cohort-survival technique offer means for projecting future enrolln,ent and consequently revenue and expenditures that vary according to enrollment. Relating cost to Aquality, or fiscal efficiency to program effectiveness may result in misuses of quantitative data. A bibliography is appended. (SW) *********************************************************************** * Reproductions supplied by EDRS-are the best that can be made * * from the original document. * *********************************************************************** 1981 Financial Analysis firAcialemk-Units Donald L. Walters U.S. DEPARTMENT OF EDUCATION NATIONAL INSTITUTE OF EDUCATION EDUCATIONAL RESOURCES INFORMATION CENTER (ERIC/ I/hes document has been reproduced as received from the person or organization originating it C3 Minor changes have been made to improve reproduction quality. Points of view or opinions stated in this docu ment do not necessarily represent official NIE position or policy

Financial analysis for academic units

The paper applies output budgeting techniques to the “production” of graduates at a British University. The cost per student graduated in 18 different disciplines is first divided between: (1) capital and maintenance costs, (2) teaching costs, and (3) administrative and general expenditures. Techniques are devised so as to allocate expenditures under these heads to individual students. Examples are given to show that: (1) academic staff costs per student can be cut by ca . 30 per cent with a doubling of enrolment, and that (2) total costs per student in scientific disciplines can be reduced by up to 25 per cent through a more intensive use of laboratories with little or no deterioration in the quality of instruction or in staff workloads. By contrast, more efficient use of classroom hours and seats available shows much lower potential economies, as do changes in student contact hours, size of teaching group and range of optional subjects. The article is directed towards those concerned with planning university resource use.

/pdf/potential-economies-of-scale-at-the-university-of-bradford-4kouwlev04.pdf

Potential economies of scale at the university of Bradford

This paper presents the results of a study of the rate of return on undergraduate education at the University of Bradford, United Kingdom, and compares them with returns calculated independently for the U.K. university system as a whole. Rates of return are measured for separate undergraduate courses and considerable variation is shown, courses in science and technology generally having lower return because of their higher costs. Private returns to the individual graduate are shown to be substantially greater than those to society as a whole. The government's return, in the form of increased tax receipts is shown to be positive. Further results demonstrate increasing marginal rates of return to society as a result of the economies of scale associated with the expansion of enrolment planned for the decade 1971–1981. The problems involved in projecting rates of return into the future are considered. The paper is directed to teachers and students of the economics of education.

Rate of return analysis and economies of scale in higher education

This paper describes a method of allocating resources within a university which provides departments with a built-in incentive to the efficient use of those resources. Present allocation systems based on norms such as the staff: student ratio, incorporate no such incentive. The method we propose involves firstly the creation of a budget for each recognizable academic unit, the size of the budget being related to the unit's student load by a published formula; and secondly, the devolution to academic units of much greater responsibility in the spending of their budgets on different items, thereby giving them a direct interest in the economical use of costly resources. We argue that initially such a system should be introduced on a pilot basis in selected subjects in a few universities and that the budgets should be designed to cover all recurrent items of expenditure.
 We do not in this paper consider how units' budgets could be extended to cover the cost of the accommodation they use in order to give them a financial incentive to use space as economically as possible. We have worked out a method of doing this, and although there are practical difficulties, we believe the idea of charging for the use of space is worth testing in practice (Dunworth and Cook, 1975).
 We finally consider the implications of budgetary devolution on the planning process within universities and on the methods by which funds are provided by the government to the universities.

Budgetary devolution as an aid to university efficiency

It seems that considerable potential economies of scale exist if the University of Bradford is representative. If enrolment is doubled with present accommodation surpluses and course structures, then average costs per student may fall by between 11 and 38 percent, depending upon the course involved and the assumptions made. Further substantial cost reductions would arise with a course structure which handled two intakes a year. However, we became increasingly aware during our research of the absence of any built-in incentive to use resources efficiently. This was most obvious in the case of buildings which were designed in a manner which fits academic requirements more like a sack than a glove, and which, once constructed, were regarded as free goods. It was also the case in respect of current items of expenditure, for under the present system of British university financing and planning, universities know in advance, subject to certain specific exceptions, their income for a five-year period and the approximate number and type of students they will enrol. Thus cost per student over the quinquennium has been determined before the students enter. Once the quinquennium has begun there are few real ways to effect economies since revenue and therefore expenditure have already been determined, nor is there any incentive for universities to cut costs per graduate. The critical time to achieve economies is therefore before quinquennial recurrent grants are fixed, and the power to do this lies with the University Grants Committee and the Department of Education and Science, not with the individual universities. Thereafter universities would need to react to such economies by implementing them as painlessly as possible.

Potential economies of scale at the university of Bradford: Summary of a paper

University Teaching Accommodation: Its Use and Allocation.

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