Post on 26-Dec-2015
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Why US Universities
Have Higher Quality?
Privatization vs. Flexibility
Elise S. Brezis BIU and Paris School of Economics
June 2010
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Leading universities: US universities
World Rank
InstitutionClassificationYear of
establishment
1Harvard UnivPNP1636
2Stanford UnivPNP1891
3Univ California - BerkeleyPub1868
5Massachusetts Inst Tech (MIT)PNP1861
6California Inst TechPNP1891
7Columbia UnivPNP1754
8Princeton UnivPNP1746
9Univ ChicagoPNP1890
11Yale UnivPNP1701
12Cornell UnivPNP1865
13Univ California - Los AngelesPub1919
14Univ California - San DiegoPub1960
Source: SJTU .
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•The purpose of this paper is to analyze the elements that are important for the quality of Higher Education.
•Are private universities a must for quality?
• 0r
•Is Flexibility in the management of university a must?
•In other words, is the quality of US universities due to being private or having flexibility of management?
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Quality and Ownership
•In the past, public universities were flourishing
•The best universities were known to be the German ones like Heidelberg and Berlin
•Today the best universities are private. (But not all private are among the best!).
•The US private universities are the highest in the ranking of universities
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InstitutionRegional rankingPrivate/Public
Harvard 1Private
Stanford2Private
Berkeley3Public
MIT4 Private
Caltech 5Private
Columbia6 Private
Princeton 7Private
Chicago 8Private
Yale9Private
Cornell10PrivateSource: SJTU
Ownership of US top 10 universities
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• Previous Research on this correlation:
•Psacharopoulos, 2005 claimed that there is a relationship between the distinction of private vs. public universities and the quality of university.
•He showed that countries with a high proportion of private institutions have overall higher quality universities.
•The correlation between top 100 institutions and the share of private resources financing HE is 63%.
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country %Private share of education
Nb. Universities in top 100
Austria51
Denmark21
France144
Germany87
Sweden124
UK3011
Japan575
Australia482
US6751
Canada414
Israel431
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I. Why Quality Matters?1. Historical Perspective
• In the past, there were universities of homogenous quality.
and• Universities were not important for economic
development.
• The reasons for the changes in the quality of universities are:
• the change of the purpose of universities • and massification.
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•From the Middle Age on, universities were part of the religious establishment, and their main role was to teach liberal arts, philosophy, and theology.
•Most university students, whose numbers were in any case few, were preparing for a career in the Church, even after the Reformation.
•Homogeneity of quality of education (all in Latin).
•During these centuries, the impact of higher education on the economy was inexistent. Until 19th century, the effects of university education on innovation are small.
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•Dramatic changes took place in the second part of 20th century
•First, the role of universities has changed and they became of utmost importance for economic growth.
•Second, the quality of education became heterogeneous:
• The number of universities and colleges in the West rose, and the number of students increased even more.
•Concurrently with this democratization of higher education, universities became heterogeneous not only in their specialization, but also in their quality.
• There are top universities,…and the others.
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• This paper analyses whether private ownership is a necessary condition for a university’s achieving quality as suggested by Psacharopoulos My presentation will have 3 parts:
I. What is Quality?
II. What elements affect Quality?1. Private Ownership2. Flexibility3. Budget
III. Empirical Analysis on relationship between quality and Ownership, flexibility, and budgets.
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I. Quality
• Universities produce multiple goods and have three main goals.
•The first goal is R&D.
•The university is the place where ideas are developed, innovation processes are invented, and basic research takes place.
•The second: educate the next generation of the labor force.•Higher education leads to an increase in human capital, which is one of the main factors of production today
•The third role is to increase social capital.
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• Therefore, the quality of a given university should be related to the excellence of these two elements: R&D and education.
• The ideal index for quality of education is related to the increase in human capital, which can be proxied by an increase in wages.
• So, assuming the same ability, better education might be proxied by the labor market.
• For R&D, the best proxy is to check its impact on other research.
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•For the past few years, two institutions have published quality indices of universities, attempting to find good proxies for these two elements: education and R&D.
•In 2004, The Times Higher Education supplements (THE) started producing a ranking of the top 500 universities.
•Shanghai Jiao Tong University (ARWU), less known at the beginning, has become well known, since it seems to proxy these two elements of quality in a superior way.
•In this paper, we use the SJTU ranking.
•The correlation of these two indices is .78
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II. Ownership
•When defining the structure of ownership of universities, it should be emphasized that there are not two, but three different types of institutions:
•Public, Private non-profit (PNP), and private for-profit (PFP).
•The first group includes all institutions for whose budgets the state is responsible. In most countries, the majority of institutions fall into this category.
•Of these 500 top universities from among 40 countries, only 12% are private.
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Leading US universities
World Rank
InstitutionClassificationYear of
establishment
1Harvard UnivPNP1636
2Stanford UnivPNP1891
3Univ California - BerkeleyPub1868
5Massachusetts Inst Tech (MIT)PNP1861
6California Inst TechPNP1891
7Columbia UnivPNP1754
8Princeton UnivPNP1746
9Univ ChicagoPNP1890
11Yale UnivPNP1701
12Cornell UnivPNP1865
13Univ California - Los AngelesPub1919
14Univ California - San DiegoPub1960
Source: SJTU .
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United States
41Vanderbilt UnivPNP1873
43Pennsylvania State Univ - Univ ParkPub1855
44Univ California - DavisPub1905
45Univ California - IrvinePub1965
47Rutgers State Univ - New BrunswickPub1766
49Univ Pittsburgh - PittsburghPub1787
50Univ Southern CaliforniaPNP1880
51Univ FloridaPub1853
58Univ North Carolina - Chapel HillPub1879
60Carnegie Mellon UnivPNP1900
61Ohio State Univ - ColumbusPub1870
68Purdue Univ - West LafayettePub1869
70Brown UnivPNP1764
74Univ ArizonaPub1885Source: SJTU .
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United States
107Univ California - RiversidePub1954
108Tufts UnivPNP1852
110Univ VirginiaPub1819
116Emory UnivPNP1836
125Baylor Coll MedPNP1900
126Mayo Clinic Coll MedPNP1972
131Univ Hawaii - ManoaPub1907
135Dartmouth CollPNP1769
138Univ California - Santa CruzPub1965
139Univ GeorgiaPub1785
140Univ Illinois - ChicagoPub1890
141North Carolina State Univ - RaleighPub1887
147Univ Massachusetts Med SchPub1962
Source: SJTU .
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United States
463Boston CollPNP1827
464Univ Maine - OronoPub1862
472Univ IdahoPub1889
474Univ Kansas Med CenterPub1905
476Med Coll GeorgiaPub1828
478Lehigh UnivPNP1865
480West Virginia UnivPub1867
481Univ LouisvillePub1798
485Univ Wisconsin - MilwaukeePub1956
487Coll William & MaryPub1693
491New Mexico State Univ - Las CrucesPub1888
497Howard UnivPNP1867
504Old Dominion UnivPub1930
507Montana State Univ - BozemanPub1893Source: SJTU .
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Leading UK universities
World Rank
InstitutionClassificationYear of
establishment
4Univ CambridgePub1209
10Univ OxfordPub1096
23Imperial Coll LondonPub1907
25Univ Coll LondonPub1826
48Univ ManchesterPub1824
53Univ EdinburghPub1582
62Univ BristolPub1876
72Univ SheffieldPub1897
81Univ NottinghamPub1798
84King's Coll LondonPub1829
92Univ BirminghamPub1900
111Univ LiverpoolPub1881
Source: SJTU .
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Leading Japanese universities
WorldRank
InstitutionClassificationYear of
establishment
20Tokyo UnivPub1877
22Kyoto UnivPub1897
67Osaka UnivPub1869
77Tohoku UnivPub1907
94Nagoya UnivPub1871
99Tokyo Inst TechPub1881
149Hokkaido UnivPub1876
150Tsukuba UnivPub1872
154Kyushu UnivPub1903
267Kobe UnivPub1902
285Keio UnivPNP1858
293Hiroshima UnivPub1929
Source: SJTU .
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Leading French universities
World Rank
InstitutionOwnershipYear of
establishment
40Univ Paris 06Pub1971/1253
52Univ Paris 11Pub1970
85Ecole Normale Super ParisPub1985/1794
101Univ Strasbourg 1Pub1567
132Univ Paris 07Pub1971/1253
183Univ Grenoble 1Pub1811
184Univ Paris 05Pub1971/1253
219Univ Montpellier 2Pub1970
251Ecole PolytechniquePub1794
264Univ Lyon 1Pub1971
271Univ MediterraneePub1969/1409
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Leading Israeli universities
World Rank
InstitutionOwnershipYear of
establishment
64Hebrew Univ JerusalemPub1918
106Technion Israel Inst TechPub1924
117Tel Aviv UnivPub1956
145Weizmann Inst SciPub1949
295Ben Gurion UnivPub1969
328Bar Ilan UnivPub1955
492Univ HaifaPub1963
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Leading Polish universities
World Rank
InstitutionOwnershipGrade
346Jagiellonian UniversityPub 11.5/100
369University of WarsawPub 10.8/100
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• There are countries in which PNPs were almost nonexistent until recently (Germany, for instance), and other countries wherein they have always existed (the US and Japan).
• The US and Japan has taken a quite different path. In these two countries, PNP institutions were already quite developed by the late 19th century.
• Moreover, in both countries, the development of PNP and public institutions occurred in parallel.
• In the US, in 1890, public institutions constituted only 22% of total enrollment. But increased during the 20th century to reach 50% in 1935, 60% in 1940, and 70% today.
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• In Japan, private institution enrollment accounts for nearly 80% of all university enrollment. However, with a few exceptions, the public universities are those ranked high.
• In Europe, the PNP sector is not developed at all, and only recently have some been established.
• The case of Germany is typical, wherein from 1980, 60 PNPs have been created.
• In the UK, only two universities are privately financed.
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• In the developing world, budget is diverted mainly to primary education, so that higher education is left mainly to financing by the private sector.
• The increase in enrollment in Latin America has been big: The rate of growth between 1960 to 1970 was 260%. In consequence, it has been compensated for by an increase in enrollment in private universities.
• In 1950, 7% of the enrollment was in private universities; in 1990 it was 40%.
- - - - - - - - -• The third type of institution is the private for-profit
(PFP) universities, all of which are quite new. While they are not numerous, it could well be that they will take off in the future.
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III. Does Private Ownership affect Quality?
Empirical Results
•The correct method to check this relationship is at the level, not of countries, but universities.
•I check on the 500 top universities, the effects of ownership, flexibility and budget on quality of universities
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• 1. Quality and Ownership
•Does private ownership affect quality?
• ownership: A dummy for the universities that are private
• also check seniority
Quality of institutions
)1()2()3(
Constant247.73
)2.82(
282.38
)19.92(
236.14
)7.83 (
Private
ownership
55.35
)35.77(
61.28
)2.35(
49.81
)1.86(
Seniority.37
)1.73(
R².02.03.05
Obs508)all(
166)US(
166)US(
Ownership and Seniority on Quality of institutions
32
• In conclusion, it appears that the results at the country level, as presented by Psacharopoulos, are also robust at the individual university level.
•In the next slides, I attempt to isolate which element implied by ownership leads to the relationship between ownership and quality.
•I focus on two main elements: flexibility and budgets.
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2. Quality and Flexibility
• One of the main differences between private and public institutions is the level of intervention by the state.
• States/governments do sometimes intervene in the universities administration.
• There are at least four levels on which governments intervene in the public institutions:
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• (1) flexibility about recruitment of scholars, and freedom in deciding on their promotions
• (2) freedom of admission of students
• (3) freedom of decisions on salaries
• (4) freedom regarding tuition fees.
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• In Table 4, I present an Index of Flexibility of public institutions in the various countries of the sample.
• On each of these four levels of government intervention, I have built an index. At each level, the ranking goes from 1 (no flexibility) to 4 (total flexibility).
• Then, I build a one-index for flexibility, which is the product of these 4 indices, and which goes from 1 to 256.
• The intuition underlying this methodology of creating this index, based on product, is that cross-effects among flexibilities are important.
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• (1) flexibility about recruitment of scholars, and freedom in deciding on their promotions
• (2) freedom of admission of students
• (3) freedom of decisions on salaries
• (4) freedom regarding tuition fees.
Poland 2 4 1 2US 4 4 4 4France 1 1 1 1UK 4 4 3 3
Quality of institutions
)1()2 (
Private
ownership
27.83
)1.32(18.90
)0.86(
Flexibility
)Sum(
7.01
)3.3(
Flexibility
)Product(.24
)3.52(
R².03.04
Obs.508508
General Flexibility on Quality of institutions
Specific Flexibility and QualitySpecific Flexibility and Quality
15.94
(2.02)
Students Admission
508
0.02
47.57
(2.38)
(3)
508508508Obs.
0.020.010.04R2
Salaries staff
27.76
(2.46)
Scholars Rcruit.
19.26
(3.64)
Tuition Fees
36.93
(1.75)
23.51
(1.10)
Private ownership
(4)(2)(1)Dependent
variable:
12.71)2.32(
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• So, it is not ownership that has an influence on the quality of universities, but rather flexibility of administration.
• Governments that leave their universities alone to make their own decisions actually give them the possibility of attaining higher quality.
• In the next slides, I analyze the effect of budgets on quality.
Budget)1()2(
Constant2.31
)1.76(
2.31
)1.79(
Private
Ownership
6.55
)4.06(
-2.77
-)0.66(
Private
)dummy for US(
10.4
)2.40(
Flexibility.03
)5.11(
.03
)5.19(
R².30.32
Obs161161
Flexibility and ownership on Budgets
42
• In conclusion, flexibility is an important factor in obtaining budgets.
- - - - -
• Are budgets per se affecting quality, and what exactly are budgets permitting to finance that seems necessary for quality?
Quality of institutions
)1()2()3(
Constant232.57
)8.61(
198.26
)4.59(
209.07
)6.37(
Private-2.38
-)0.06(
Flexibility.25
)1.30(
Budget /student.002
)2.52(
.003
)0.86(
.001
)1.91(
Academic staff.03
)2.38(
.01
)1.39(
.02
)2.18(
Non academic staff.01
)4.10(
.001
)2.15(
.01
)2.71(
Professor salary.001
)3.27(R².36.44.37
44
• Conclusion
• Higher flexibility (and not private ownership) leads to higher budgets, which lead to quality
45
•Higher budgets permit to finance more ‘non-academic’ staff as well as higher salaries -
two necessaries elements for quality.
•Indeed, good universities employ much more non-academic staff and pay higher salaries
46
Conclusion
•Is Privatization Necessary
to achieve Quality of Universities?
•No, but flexibility is.
47
(I)
•The US universities have much more flexibility than the EU universities.
•In order to increase quality, governments should not regulate Higher Education
•(II)
•The most important element of flexibility is: Tuition fees.
•Tuition fees should be fixed by universities in a differential way; not by governments.