Which universities are (and which aren't) set to grow?

What is it about?

Numerous studies have examined the question of how to measure the efficiency of institutions. In this study, we focus on how efficiently universities use their resources to generate revenue. Simple models can do this under the assumption that universities suppose that tuition fees are fixed. Our model considers the more realistic situation in which universities choose tuition fees (for some kinds of student - like overseas students and postgraduates) in the knowledge that this will affect demand. Using data on UK universities, we find that, with some exceptions, efficiency is quite high. A key finding of the analysis is that, following removal of the cap on undergraduate student numbers in 2015, we should expect to see expansion of smaller, research intensive universities as they seek to become revenue efficient.

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Why is it important?

This is the first application of a revenue efficiency model that allows a situation in which producers can vary their prices. From a policy perspective, the finding that revenue efficiency requires expansion of smaller, research intensive universities is important because this may help predict the likely evolution of the higher education sector in the years to come.

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