CHAPTER 2: BRIEF SURVEY OF LITERATURE
2.1. Brief review of the economics of education
2.1.2. Economic principles and methods applied in education research issues
2.1.2.1. Efficiency studies
33 Mubangizi, 2010; OECD, 1997). Some questions that are specifically dealt with in this particular education research issue are, inter alia:
What is the relationship between government (public expenditure packages) and private expenditure on education?
How substitutable and relatively efficient are government and private expenditure at generating human capital?
2.1.2. ECONOMIC PRINCIPLES AND METHODS APPLIED IN EDUCATION
34 terms of subsequent educational outputs achieved from a given resource dose of educational inputs (Worthington, 2001). An input in education encompasses inter alia an incremental change of an educational programme, lecturer and tutoring staff capacity building, training or workshops; audiovisual equipment, media or technologies used in different modes of instruction, or an implementation of a given education policy such as enhancing mechanisms to monitor lecture attendance. An output or outcome encompasses inter alia the quality of teaching and learning, the completion of an education programme, progression rates, employment of students in specific professional careers, student learning and satisfaction, opportunity costs of students’ and parents’ time, enrolment or placement of alumni, retention rates, improvement of graduation, or throughput rates. According to the UKZN’s Table of productivity payouts, the most important measurable outputs from the higher education sector in South Africa are inter alia research output (books, book editorial and chapter in books; articles in approved and DoE journals and journal editorial, conference proceedings, patents or licences, and research income), NRF rating, academic qualifications conferred and completed (degrees, diplomas and certificates) and number of graduating postgraduate students, academic staff who graduated with Doctoral degree, and creative contribution (local or overseas) (Taylor and Harris, 2004).
Behrman (1996, 345) distinguishes three main forms of efficiency: (1) allocative efficiency (internal assessment) is where inputs are distributed toward the production of various outcomes in order that the values of marginal products (MP) for each input are the same across all uses. That is, educational institutions in South Africa can be optimally deployed both on teaching, learning and research, for instance;
(2) input-choice efficiency occurs where inputs are selected so that their marginal benefit (MB) equals marginal cost (MC). Here, incentives inputs (earnings, wages or salaries paid to academics and non- academics – administrators and support staff) can be compared with alternative prices of factors of production, educational technology, or infrastructure inputs in generating the desired educational outcomes or outputs; and (3) output efficiency (external assessment) applies when the educational outcomes or outputs are such that social marginal cost (SMC) equals social marginal benefit (SMB). Two measures of allocative efficiency: (1) the cost-effectiveness ratio (CER) and (2) Firm studies are discussed below.
(1) COST-EFFECTIVENESS RATIO
Education economists have used both the cost-effectiveness ratio (CER) and unit cost per outcome analyses to examine internal efficiency of HEIs (including efficiency of their personnel and students) by relating their incentive inputs (costs) to total achievement (the assigned or expected educational outcomes or
35 outputs) – assuming that outcomes can be effectively compared after those inputs have been used across different educational initiatives (Thomas, 1990). Kontolaimou et al. (2006), for example, measured the efficiency in an educational institution in Greece as the ratio of a weighted sum of outputs (educational outcomes) over a weighted sum of inputs (educational inputs).
The context with or without the educational interventions is crucial for assessing the incremental costs and benefits of the intended educational interventions. If an educational intervention has multiplier effects in terms of economic and fiscal impacts, sustainability or involves risks, then an efficiency study on this educational intervention and its alternatives can be done to decide “how to”, rather than “whether to” go ahead with that typical intervention. The efficiency studies assess if benefits accrued to the educational institution, the programme, or the students after the educational interventions make it worth undertaking the intended educational interventions. Efficiency studies are helping educational institutions to decide “which version” or “which educational input” is to be used, funded, or rejected. Some questions that education economists are specifically dealing with in this particular efficiency analysis are:
Is the educational intervention financially sustainable?
What are the risks involved in an educational intervention?
Are there any other externalities or environmental impact on an educational intervention?
How would costs and benefits of alternatives to achieve the same educational interventions compare to the educational intervention in question? (i.e. asking a counterfactual question).
Who gains and who loses if the educational intervention is implemented?
The appropriate choice of educational outcome to be considered may include achieving educational objectives such as increased participation rates, retention rates or throughput rates among others. Education economists therefore, assess the socio-economic impacts of educational inputs depending on inter alia: how widespread are the benefits or which outcome benefits the HEI the most, how the education gains depend on students’ initial characteristics, and/or how individual students choose between educational programmes or majors. For example, an incremental increase in teaching and tutorial staff in a range of degree programmes and qualifications offered in UKZN’s CLMS can be assessed internally or externally. The numbers of enrolments or cost of provision of courses/modules/undergraduate/postgraduate programmes in the CLMS at UKZN or any HEI can also be assessed to establish if they are sufficient to meet management skills preferences or professional skills expected in the law and management professional careers in South Africa, for example. Another example is to examine how the closure of a neighbourhood HEI (not offering
36 a course or module on campus) raises commuting costs for local families of students attending an out of neighbourhood HEI (or attending a course or module on another campus).
In the aggregate across the period 2004-2008, there was a substantial increase in the number and standards of qualifications obtained by undergraduate students in the CLMS. Combining this evidence with that on broadly static per-unit resources used and the number and standards of qualifications obtained at UKZN at large, there appears to have been a substantial increase in efficiency in the College – much higher academic outcomes with unchanged (or even declining) resources (assuming equivalence of resources allocation across UKZN’s Colleges over time).
Some efficiency studies acknowledge the difficulties of selecting educational outcomes. For example, it is difficult to calculate a metric, an effect size, or a standardized mean difference, which can allow the comparison of two educational outcomes. Getting consistent and reliable cost information on alternative educational programmes is difficult and generally few cost studies have robust and full data available on actual expenditures on educational inputs used by educational institutions.
(2) FIRM STUDIES
Generally firm studies examine economic and technological efficiencies. Economic efficiency occurs when the firm produces a given output at the least cost, while technological efficiency occurs when the firm produces a given output by using the least amount of inputs. Parkin (2010) maintains that economic and technological efficiencies are key determinants of a firm’s efficiency. Education economists are concerned about how input-choice and allocative efficiency, and value-added effectiveness could be improved in HEIs reflecting on the firm’s model and theory. Some studies have modelled an educational institution as a firm that manufactures educational outcomes analogously to how firms produce outputs (Tewari et al., 2008).
These studies use an educational production function approach to discover which types of resources (educational inputs) and allocations have the greatest effect on outcomes (educational outputs) in HEIs and then use the identified determinants in the provision of education to best effect (Taylor and Harris, 2004).
These studies examine issues such as: how a higher quality of education may be achieved in the
“production” of education in the education “industry” i.e. in educational institutions (Hanushek, 1986). This study follows similar a process with some particularity as explained in the methodology in the following Chapter 3.
37 While in firms’ theory or in industrial sectors, performance is measured by inter alia firms’ profits, income earnings, surpluses, or sales value per-employee; in education, point-estimate measures are used to similarly track the performance of an educational institution (Belfield, 2000). For example, studies have estimated the effect that family background, resource endowments and institutional features have on student performance in key curricular areas (Van Den Berg and Hofman, 2005). For modelling purpose, these studies typically use years of schooling, although one year of schooling is unlikely to be uniform across different population cohorts or academic levels. Educational institutions’ quality measures are also incorporated in simple quantity estimates, particularly if the intention is to model education as an input into the production of other social outcomes. Similarly, the differences in prior ability or home endowment across population groups of students though hypothesized to be imperfectly observed were also modelled (notwithstanding value-added adjustments) in some studies. Students’ performance in HEIs is modelled using an educational production function approach and empirically tested via regression analysis (Tewari et al., 2008; Parker, 2010) or non- parametric Data Envelopment Analysis (DEA) (Kontolaimou et al., 2006, Pseiridis et al., 2006; Taylor and Harris, 2002 and 2004; Worthington, 2001; Athanassopoulos and Shale, 1997). Athanassopoulos and Shale (1997) empirically tested the relative efficiency amongst 45 universities in the UK using DEA.