An evaluation and explanation of (in)efficiency in higher education institutions in Europe and the U.S. with the application of two-stage semi-parametric DEA

This study uses data envelopment analysis (DEA) to evaluate the relative efficiency of 500 higher education institutions (HEIs) in ten European countries and the U.S. for the period between 2000 and 2010. Efficiency scores are determined using different input-output sets (inputs: total revenue, academic staff, administration staff, total number of students; outputs: total number of publications, number of scientific articles, graduates) and considering different frontiers: global frontiers (all HEIs pooled together) and a regional frontier (Europe and the U.S. having their own frontiers). Changes in total factor productivity are assessed by means of the Malmquist index and are decomposed into pure efficiency changes and frontier shifts. Also investigated are the external factors affecting the degree of HEI inefficiency, e.g. institutional settings (size and department composition), location, funding structure (using two-stage DEA analysis following the bootstrap procedure proposed by Simar and Wilson, 2007). Specifically, it is found that the role of the university funding structure in HEI technical efficiency is different in Europe and in the U.S. Increased government funding is associated with an increase in inefficiency only in the case of European units, while the share of funds from tuition fees decreases the efficiency of American public institutions but relates to efficiency improvements in European universities.