Quality as a latent heterogeneity factor in the efficiency of universities

In this paper we show the usefulness of recent advanced nonparametric efficiency techniques to model performance universities in presence observed and unobserved heterogeneity. Using directional distances for benchmarking purposes, identify a latent heterogeneity factor related human capital their management, that is independent from size, interpret identified as “quality” universities. After testing significance factor, investigate its impact on boundary production set (efficient frontier) units efficient frontier. The frontier distribution our European Universities sample appear influenced by estimated quality factor. We these impacts various points view, including trade-off between well roles size specialization.