Lancaster University Management School Working Paper 2005 / 064 Higher education institutions ' costs and efficiency : taking the decomposition a further step

A multiproduct cost function is estimated for English higher education institutions using a panel of data from recent years. The panel approach allows estimation by means of a random parameter stochastic frontier model which provides considerable new insights in that it allows the impact on costs of inter-institutional differences in the cost function itself to be distinguished from inter-institutional differences in efficiency. The approach used here therefore resembles in some respects the non-parametric methods of efficiency evaluation. We report also on measures of average incremental cost of provision and on returns to scale and scope. JEL Classifications: C14, C23, C51, D20, I20