The Tradeoffs in Higher Education Policy: Academic Excellence vs. Social Equity

As Europe is increasingly integrated and open for internal competition, the higher education (HE) market is becoming more competitive; some countries are successful in making their HE institutions able to compete at international level, while others are left behind, closed to their local markets. Within this context, I analyze universities as economic agents that compete in the market for human, material, and intangible resources. Using standard statistical techniques, I find that two things matter the most for success: Financial resources and university institutional autonomy

First, the performance of a country’s higher education system strongly depends on the amount of spending per student. In Europe, about ¾ of total spending in higher education is public.Besides the UK, in all continental Europe the levels of private spending in HE are very low. This is in contrast to the US. However,  it’s not only the level of spending that matters, but whether the money can be used with high levels of autonomy by the universities to establish their tuitions, recruit faculty, organize their curricula, and select students, or the money has to be used within the framework of strong central regulations by the state on these matters. Overall, High spending per student is a necessary, but not sufficient condition for success. Only under institutional conditions involving university autonomy, there can be competition and the more investment made in higher education can produce high quality products in HE.