Abstract
We test the hypothesis that universities are more productive when they are both more autonomous and face more competition. Using survey data, we construct indices of university autonomy and competition for both Europe and the United States. We show that there are strong positive correlations between these indices and multiple measures of university output. To obtain causal evidence, we investigate exogenous shocks to US universities’ expenditures over three decades. These shocks arise through the political appointment process, which we use to generate instrumental variables. We find that an exogenous increase in a university’s expenditure generates more output, measured by either patents or publications, if the university is more autonomous and faces more competition. Exploiting variation over time in the ‘stakes’ of competitions for US federal research grants, we also find that universities generate more output for a given expenditure when research competitions are high stakes. We draw lessons, arguing that European universities could benefit from a combination of greater autonomy and greater accountability. Greater accountability might come through increased reliance on competitive grants, enhanced competition for students and faculty (promoted by reforms that increase mobility), and yardstick competitions (which often take the form of assessment exercises). — Philippe Aghion, Mathias Dewatripont, Caroline Hoxby, Andreu Mas-Colell and André Sapir
Highlights
With increasing globalization has come increasing scrutiny of the differences in the performance of countries' universities
We test whether universities produce more output from an exogenous increase in their resources if they are more autonomous and face more competition. This is a sufficient condition for autonomy and competition to cause greater university output. (We say "nearly" because we can only test what universities produce with marginal resources, and it is always possible that they use marginal resources efficaciously and inframarginal resources inefficaciously or vice versa.) we would like to conduct causal analysis for Europe, we rely on U.S states for this part of the analysis
We start by showing that university autonomy and competition are positively correlated with university output, both among European countries and among U.S states
Summary
With increasing globalization has come increasing scrutiny of the differences in the performance of countries' universities. We test whether universities produce more output from an exogenous increase in their resources if they are more autonomous and face more competition This is (nearly) a sufficient condition for autonomy and competition to cause greater university output. (We say "nearly" because we can only test what universities produce with marginal resources, and it is always possible that they use marginal resources efficaciously and inframarginal resources inefficaciously or vice versa.) we would like to conduct causal analysis for Europe, we rely on U.S states for this part of the analysis We do this because, first, we have 1950s measures of universities' governance and competition from private institutions. For our understanding of patents as a measure of research outcomes, we are indebted to the previous literature on patenting, especially Hall, Jaffe, and Tratjenberg (2001) and Hall (2006)
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