Monday, May 25, 2009

Government funding and university quality

Research productivity is highest for schools in states that allow more autonomy. This is the conclusion of a new NBER Working Paper (No. 14851) “The Governance and Performance of Research Universities: Evidence from Europe and the U.S.” (Philippe Aghion, Mathias Dewatripont, Caroline M. Hoxby, Andreu Mas-Colell, and André Sapir).

The authors have constructed an index of research productivity that includes patents, number of alumni who have won Nobel Prizes in science, citation indices, and numbers of highly cited researchers for 196 European universities. They find that “the average Shangai ranking for a European university that must get its budget approved by the government is just above 200 while the average ranking for a European university that does not need budget approval is 316. In general, each percentage of a university’s budget that comes from core government funds reduces its rank by 3.2 points.”

European universities required to pays the same amount to all faculty members with the same seniority and rank have an average Shangai ranking of 213. Universities free to pay faculty as they see fit have an average ranking of 322. Universities free to select undergraduate students as they see fit have a Shangai ranking 156 points higher than those in which the government determines who will attend . Competition also improves research quality. Each percentage of a university’s budget that comes from competitive research grants increases its ranking by 6.5 points.

And the results for state universities in the United States are similar.

The conclusion for university reform policy is straightforward: grant less importance to the “führer prinzip” that seems to inspire the French government, and rely more on the competition principle: competition for non government funding, competition for good students, and competitive remuneration of faculty.

While academics overwhelmingly don’t like markets, still markets would be good for them.

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