Quality as a Latent Heterogeneity Factor in the Efficiency of Universities

Cinzia Daraio, Leopold Simar and Paul Wilson

No 2021011, LIDAM Reprints ISBA from Université catholique de Louvain, Institute of Statistics, Biostatistics and Actuarial Sciences (ISBA)

Abstract: In this paper we show the usefulness of recent advanced nonparametric efficiency techniques to model the performance of universities in the presence of observed and unobserved heterogeneity. Using directional distances for benchmarking purposes, we identify a latent heterogeneity factor related to the human capital of the universities and their management, that is independent from their size, and interpret the identified latent factor as a “quality” factor of the universities. After testing the significance of this latent factor, we investigate its impact on the boundary of the production set (efficient frontier) and on the distances of the units from the efficient frontier. The frontier and the efficiency distribution of our European Universities sample appear influenced by our estimated latent quality factor. We investigate these impacts from various points of view, including the trade-off between our quality factor and efficiency as well as the roles of size and specialization.

Keywords: nonparametric efficiency; performance assessment; benchmarking; directional distances; conditional efficiency; observed and unobserved heterogeneity; European universities; quality (search for similar items in EconPapers)
Date: 2021-01-01
Note: In: Economic Modelling, Vol. 99, no. June 2021, p. 105485 (2021)
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Citations: View citations in EconPapers (12)

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Journal Article: Quality as a latent heterogeneity factor in the efficiency of universities (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:aiz:louvar:2021011

DOI: 10.1016/j.econmod.2021.03.004

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