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Government funding incentives and study program capacities in public universities: theory and evidence

Jan Morten Dyrstad (), Mia Marie Wallgren Sohlman () and Tor Henrik Teigen
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Jan Morten Dyrstad: Department of Economics, Norwegian University of Science and Technology
Mia Marie Wallgren Sohlman: Department of Economics, Norwegian University of Science and Technology
Tor Henrik Teigen: Department of Economics, Norwegian University of Science and Technology

Working Paper Series from Department of Economics, Norwegian University of Science and Technology

Abstract: Objectives aimed at increasing higher education productivity have stimulated use of performance-based funding (PBF) of higher education institutions both in Europe and the US. On theoretical grounds PBF is expected to speed-up study program capacity adjustments. We find from Norwegian data that study program capacities are adjusted favorably to productivity only if there is competition for students. Strengthened PBF does not affect the adjustments. Instead, admissions seem to adjust to secure full enrollment. The results provide an explanation of why very few positive effects of PBF in higher education are found in the literature. Given continued use of PBF to enhance productivity, a likely policy implication is to pay more attention to the overall allocation of study places to higher education institutions.

Keywords: Higher education funding; performance funding; study program dimensioning; incentives; regulation (search for similar items in EconPapers)
JEL-codes: H52 I23 I28 L51 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2021-12-03
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