The transient and persistent efficiency of Italian and German universities: a stochastic frontier analysis

Despite measures on the European level to increase the compatibility between the higher education sectors, the recent literature exposes variations in their efficiencies. To gain insights into these differences, we split the efficiency term according to the two management levels each university is confronted with. We separate short-term and long-term efficiency while controlling for unobserved institution-specific heterogeneity. We argue that the first term reflects the efficiency of the individual universities working within the country, while the second term echoes the influence of the overall country-specific higher education structure. The cross-country comparison displays whether efficiency differences between countries are related to the individual performance of their universities or their higher education structure. This allows more purposeful policy recommendations and expands the literature regarding the efficiency of universities in a fundamental way. Choosing Italy and Germany as two important illustrative examples, we show that the Italian higher education sector exhibits a higher overall efficiency value. With the individual universities working at the upper bound of efficiency in both countries, the remaining inefficiency and the gap between the countries are caused by persistent, structural inefficiency. Future measures should hence aim at the country-specific structure and not solely at the activities of single universities.