Costs and Productivity in Higher Education: Theory, Evidence, and Policy Implications

Abstract

Cost issues in higher education have received considerable attention in the literature of higher education over the past three decades. Since the early 1970s, numerous studies (e.g., Witmer, 1972; Allen and Brinkman, 1984; Brinkman and Leslie, 1987; Tsang, 1989; Schapiro, 1993; Brinkman, 1990; St. John, 1994; Olson, 1996) have provided extensive reviews of the literature on the subject. Studies examining institutional costs to analyze internal efficiency have used various frameworks and methods. These studies have examined a large number of concepts (e.g., unit costs, expenditures by function, the structures of costs, and economies of scale and scope) in order to better understand the use of resources in higher education to produce certain outputs. The majority of the studies have examined instructional costs. Typically, they were interested in the following types of questions: How much does it cost to educate each student? Are there any significant variations in the cost of educating students across institutions or within institutions? How much was spent by function (e.g., instruction, research, administration, outreach services, and various forms of infrastructure support)? Have there been significant changes over time in per student costs or expenditures by function (i.e., trend analyses). Are there economies of scale and scope?