Efficiency of the top 50 business schools in the United States

Yukiko Hirao

Applied Economics Letters, 2012, vol. 19, issue 1, 73-78

Abstract: This article measures efficiency of the top 50 business schools in the United States in 2006, using the Data Envelopment Analysis (DEA) method. We use peer assessment (to represent school quality) and average Graduate Management Admission Test (GMAT) scores (to represent student ability) as inputs and average starting salary and the percent of graduates employed upon graduation as outputs. The 50 business schools consist of 27 private schools and 23 public schools, and their efficiency scores are compared. We find that although technical efficiencies of private and public schools are both high, scale and overall efficiencies of the public schools are lower than those of the private schools. And most public schools exhibit Increasing Returns To Scale (IRTS). The returns to scale in this article refers to increases in the output measures -- starting salary and the employment rates -- in response to increases in the quality of inputs -- peer assessment and the average GMAT scores. Hence, schools that exhibit IRTS will experience more than proportionate increases in starting salary and the employment rates by raising the quality of inputs. The policy implication is that for many public schools, efficiency will be improved if they could improve school and student quality levels.

Date: 2012
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DOI: 10.1080/13504851.2011.568380

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