This article empirically estimates a stochastic cost function and thereby estimates local economies of scale and cost-efficiency measures of the public universities in Bangladesh. A flexible quadratic cost function, an unbalanced panel dataset and the maximum likelihood estimation technique have been used in the study. The empirical results show that though the public universities have very high relative efficiency measures, they are scale inefficient.
Battese, G.E. & Coelli, T.J. (1995). A model for technical inefficiency effects in a stochastic frontier production function for panel data. Empirical Economics, 20(2), 325–332.
2.
Baumol, W.J., Panzar, J.C. & Willig, R.D. (1982). Contestable markets and the theory of industry structure. New York: Harcourt Brace Jovanovich.
3.
Bowen, Howard R. (1980). The costs of higher education: How much do colleges and universities spend per student and how much should they spend?USA: The Carnegie Foundation for the Advancement of Teaching.
4.
Cheng, G. (2007). Cost structure of higher education in China. Unpublished PhD thesis, Beijing Normal University, Beijing.
5.
Coelli, T.J. (1996). A guide to FRONTIER Version 4.1. The University of New England Working Paper. Retrieved 3 February 2009, from www.une.edu.au/econometrics/cepawp.htm
6.
Cohn, E., Rhine, S.L. & Santos, M.C. (1989). Institutions of higher education as multi-product firms: Economies of scale and scope. Review of Economics and Statistics, 71(2), 284–290.
7.
Harvey, L. & Green, D. (1993). Defining quality. Assessment and Evaluation in Higher Education, 18(1), 9–34.
8.
Hashimoto, K. & Cohn, E. (1997). Economies of scale and scope in Japanese private uni-versities. Education Economics, 5(2), 107–116.
9.
Izadi, H.J., Oskrochi, R. & Crouchley, R. (2002). Stochastic frontier estimation of a CES cost function: The case of higher education in Britain. Economics of Education Review, 21(1), 61–71.
10.
Johnes, G. & Taylor, J. (1987). Degree quality: An investigation into differences between UK universities. Higher Education, 16(5), 581–602.
11.
Johnes, G., Thanassoulis, E., Lenton P. & Emrouznejad, A. (2005). An exploratory analysis of the cost structure of higher education in England. Research Report No. RR 641, Department for Education and Skill, Lancaster University Management School, UK.
12.
Johnes, G. & Johns, J. (2009). Higher education institutions costs and efficiency: Taking the decomposition a further step. Economics of Education Review, 28(1), 107–113.
Koshal, Rajindar & Koshal, Manjulika (1995). Quality and economies of scale in higher education. Applied Economics, 27(8), 773–778.
15.
Koshal, Rajindar & Koshal, Manjulika (1999). Economies of scale and scope in higher education: A case of comprehensive universities. Economics of Education Review, 18(2), 269–277.
16.
Koshal, R., Koshal, Manjulika & Gupta, A. (2001). Multi-product total cost function for higher education: A case of bible colleges. Economics of Education Review, 20(3), 297–303.
17.
Lewis, D.R. & Dundar, H. (1995). Economies of scale and scope in Turkish universities. Economics of Education, 3(2), 133–156.
18.
Longlong, H., Fengliang, Li & Weifand, Min (2009). Multi-product total cost functions for higher education: The case of Chinese research universities. Economics of Education Review, 28(4), 505–511.
19.
McMillan, M. & Chan, W.H. (2006). University efficiency: A comparison and consolida-tion of results from stochastic and non-stochastic methods. Education Economics, 14(1), 1–30.
20.
Nelson, R. & Hevert, K.T. (1992). Effect of class size on economies of scale and marginal costs in higher education. Applied Economics, 24(5), 473–482.
21.
University Grants Commission (UGC) (2006a). 33rd Annual Report. Dhaka: The University Grants Commission, Bangladesh.
22.
University Grants Commission (UGC) (2006b). Strategic plan for higher education in Bangladesh: 2006–2026. Dhaka: The University Grants Commission, Bangladesh.
23.
Windham, D.M. & Chapman, David W. (1990). The measurement and interpretation of educational costs. In D.M. Windham & David W. Chapman (Eds), The evaluation of education efficiency: Constraints, issues, and policies (p. 150). London: JAS Press.
