Nonparametric analysis of educational costs

Nonparametric analysis of educational costs

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Article ID: iaor20003530
Country: Netherlands
Volume: 119
Issue: 3
Start Page Number: 605
End Page Number: 612
Publication Date: Dec 1999
Journal: European Journal of Operational Research
Authors:
Keywords: statistics: data envelopment analysis, financial, public service
Abstract:

Traditional economic analyses of the public sector that assume cost minimization are not consistent with political models of bureaucracy. If costs are not minimized then estimated cost functions will be biased. The purpose of this paper is to provide a flexible nonparametric technique based on Farrell-type efficiency measures to estimate public sector costs. Standard indices need to be modified to fit the special nature of public sector service provision which is characterized by an influence of exogeneous variables on cost. A useful by-product is an index of environmental harshness faced by local governments. For illustrative purposes, this technique is applied to a sample of New York State school districts. It is found that nearly 64% of districts are cost inefficient, spending on average $1200 per pupil above the cost minimizing level. In addition, it is estimated that the average school district faces environmental cost of over $1700 per pupil.

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