european universities at the crossroads: more market or more … · 2012. 10. 17. · investments...

European Universities at the Crossroads:More Market or More Hierarchy?

Prof. Dr. Erik E. Lehmann

CRUI & CCSE workshop on Universities and Society

and highest ranked universities (THE 2010/12)Metropolit an Areas

Erik E. Lehmann – European Universities at the Crossroad 2

Government and Hierarchy

Market Based

?

Universities (end of the 13th century)


Universities (end of the 15th century)


Metropolitan Aeras and highest RnakedUniversities (THE 2011)


….


http://www.timeshighereducation.co.uk/story.asp?sectioncode=26&storycode=421400&c=1

o „We hire Russian Academics to teach Math to Chinese Students“(Chuck Wessner, National Academies, US, 18.06.2012, CCSE workshop; Bergamo)

o Non-western nations are agressively training and hiring scientists andengineers. The number of PhDs awarded in China…increased morethan five-fold between 1995-2005 (French,2005: „China Luring Foreign Scholars to Make its Universities Great“, NYTimes, Oct. 26)

o „…we risk the possibility of seriously diminishing scientific productivityin the West“ (Paula Stephan, 2008, p. 27)

o “The UK cannot afford to be outmanoeuvred by other countries that clearly recognise that investment in their leading universities is the key to growth,“(Wendy Pratt, director general of the research-intensive universities in the UK, 3rd. Oct. 2012)

Outline


ACM International Collegiate Programming Contest


Countries

Winner Country Most Recent

17 United States 1997

7 Russia 2012

4 China 2011

2 Poland 2007

2 Canada 1999

1 Czech Republic 1998

1 Germany 1995

1 Australia 1992

1 New Zealand 1990

http://en.wikipedia.org/wiki/ACM_International_Collegiate_Programming_Contest

ACM International Collegiate Programming Contest


Wins Country InstitutionMost Recent

4 RussiaSaint Petersburg State University of Information Technologies, Mechanics and Optics

2012

3 China Shanghai Jiao Tong University 2010

3 United States Stanford University 1991

2 Poland University of Warsaw 2007

2 Russia Saint Petersburg State University 2001

2 Canada University of Waterloo 1999

2 United States California Institute of Technology 1988

2 United States Washington University in St. Louis 1980

o Two major questions:

• Who receives the returns of the investments in higher education?

• Who bears and pays the costs of the investment?

o Two dichotomous approaches about education as a „good“

• „Education is a private good“

• „Education is a public good“

„Is there a free lunch?The economic logic of Investments in Education


o Education as an Investment: Discounted present value method…• Compare two students from high school (Mary, John):

� Mary: completes college in four years, enters the job market andreceives $28.000 (on average: Current population Survey 2009)

� John: enters the job market immediately and receives $21.000 (on average, as above).

� Gap in average earnings is 7.000US$ growing steadily from age 22 toage 42 (and then levels off at later stages)

� Mary overtakes John at the age of 34� Live time earning net of tuitions at age 64:

Mary $1.2 million; John: $780.000 (discount rate 3%)• Calculus:

� College as an investment in one‘s human capital� The size of the pie is the present discounted value of human capital)

• Question: Distribution of the pie – who earns who pays? (source: Avery/Turner, 2012, Student Loans: Do College Students Borrow too Much – or Not Enough? JEP 26(1), p.165-192)

„There is no free lunch“The economic logic of the Anglo-Saxon System


o The size of the pie is affected by the way it is carved! � Mary receives the largest piece of the cake and invests in her human

capital (tuition fees, borrowing decisions, opportunity costs…)� The college (university) is the intermediary who shapes the size of the

pie and thus earns another piece of it– Selection mechanism (students, academics)– „guaranteeing“ starting and mid-career salaries– Investments in University-Industry relationships– Investments in „Signals“ (Rankings, …)

� Society benefits (technological, economical and cultural progress…) – some public spendings (basic research and teaching)– Federal student lending programs, ….

o Generates a high value in technological and economic progress, shared among them who makes the relationship specific investment!



(source: Newsweek)Rankings of least 25 affordable universities….


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Least Affordable Universities: Depts and Earnings

Total Price (on campus) Average Dept of Graduates Starting Median Salary Mid-Carrer Median Salary

(OECD)Education ypays!

-40

-20

0

20

40

60

80

1998 1999 2000 2002 2003 2004 2005 2006 2007 2008

in %

Income advantage or disadvantage compared to completed professional education

HEI degree School (Real-/Hauptschule or less)


• Students/Graduates:� Exploding tuition fees and college borrowing (overtaking total credit

card debt in 2008, $1 trillion in 2012).� Selection effects towards a career with high „earnings premiums“

(finance, law, medicine, ….)• Faculty:

� Investments in cost reduction– nationwide employed full-time declined from 80% (1970) to 51.3% (2007)– vast majority of part-time members do not have Ph.Ds– Percentage of full-time faculty not on tenure track increased from 18.6%

(1975) to 37.2% (2007)

� crowding out of academic fields with a lower „earning premium“ (arts and humanities)

� grade inflation, excessive rejection rates• Society:

� Increasing inequality between „poor“ and „rich“ due to private investments in education (path dependence of education and income)



o ...Education is (almost) a public good….no one should be excludedfrom higher education…

o who benefits?• Students/graduates:

� higher life time earnings� students from all broad levels of population (?)

• Faculty: ?• Society: regional embeddedness (industry,inhabitants, …)

o Who pays?• Students/graduates: tuition fees (if at all); opportunity costs• Faculty: ? • Society/Politics: Student loan program, „Lunch is almost for free“

o Generates a value, resulting not only in a technological and economicprogress but also in social achievements, shared among all who makespecific investments!

„Education is (almost) public good“Continental Europe….


(source: own calculations, media press, EU, OECD)Tuition fee in US$/year


0

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10000

15000

20000

25000

30000

35000

tuition fee in USD/year (2012)

tuition fee in USD/year

o ...there is no free lunch …• Students/graduates:

� Adverse selection and moral hazard behavior (wrong and lowincentives)

� High employment rates and excessive supply of graduates in somefields (arts&humanities)

� Immobility of students (regional embeddedness)� Crowding out of non-European students

• Faculty: low incentives (moral hazard behavior), self selection effects (totop universities – but also mediocre universities), nepotism, crowding out effects (teaching versus research)

• Society: increasing inequality across regions, creation of porc cycles, lower (but sometimes stable) growth rates

o Less selective, lower percentage of „Top Ranked“ universities but also lowerpercentage „on the bottom“

„Education is (almost) public good“Continental Europe….


Coordination and Motivation Mechanisms

Mechanisms Decentralized & Market Based System(Anglo-Saxon System)

Hybrid System(Continental Europe)

Centralized & Governance Based System (Asia)

Selection of Students Tuition FeesGraduation Level

Almost none“Public Good Character”

Tuition FeesRecommendation

Selection of Professors

Performance based tracks Career systemScientific community

RecommendationCareer system

Research & Teaching shaped by market forces academic freedom “order & command” Imitation and optimization of products/processes

Performance Indicators

Economic profit on the university level Rankings

Economic and Social Value

Efficiency and Competitiveness on the State levelRanking positions

Governance Independent boards(almost) university level

Self-government, state-governmentalmost publicRegional level

State-governmentalmost publicNational level

o Advantage of the Continental Europe is regional diversity!• Students/graduates:

� Tuition fees and public supporting systems (subsidizing across fields – not onlyaccording to „employability“)

� Tuition fees for non-Europeans• Faculty:

� incentives for joint programs in research and teaching– Joint degrees: double, triple degrees– Increasing the incentives for mobility

� Reducing administrative effort� Tenure tracks for young researchers

• Society/Politics: � policy between „market“ and „hirarchy“: more autonomous universities,

stronger „Presidents“ and „Board of Directors“ � Efficiency and productivity within the regional context!

o Trading off the „Costs“ and the „Benefits“ of the different systems – but takinghigher education policy away from myopic decision makers (on all levels !)

..at the crossroads?….Continental Europe….


The way to go?


Appendix…..


Non-German graduated students in Germany


Other Countries

56.1%

China12.7%

Turkey7.3%

Russia5.4%

Poland4.4%

Bulgaria3.9%

Austria3.6%

Ukraine3.6%

France3.0%

Distribution of 38.300 foreign graduates in 2011

Coordination and Motivation Mechanisms

Mechanisms Decentralized & Market Based System(Anglo-Saxon System)

Hybrid System(Continental Europe)

Centralized & Governance Based System(Asia)

Selection of Students

Overextension (debt overload) Misallocation of students to universities and academic fields as a cause of high tuition fees

Misallocation of students as a cause of low (almost no) tuition feesBrain drain (?)

Nepotism

Selection of Professors

Performance based tracks, differences across academic fields

Adverse selection effects (opportunity costs)Brain drain (?)Nepotism, schools of thoughtMoral hazard behavior

Nepotism

Research & Teaching

Affected by market prices towards fields with higher “market prices”

academic freedom Separation of teaching (the masses) and research

Performance Indicators

Grade inflationOverestimation in signals Performance Differences across universities

Excessive demand Performance differences across universities and faculties

Overestimation in selected universities and fields (natural sciences)

….stuck in public spending….

0

5

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20

25

New

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Mex

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Chi

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Bra

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Sw

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Nor

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% of total public expenditure 2009 2005 2000

Total public expenditure on education as a percentage of total public expenditure (2000, 2005, 2009)

Countries are ranked in descending order of total public expenditure on education at all levels as a percentage of total public expenditure in 2009.Source: OECD. Table B4.3. See Annex 3 for notes (www.oecd.org/edu/eag2012).


Almost

0

1

2

3

4

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8

9

in %

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GD

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Private & public expenditure for educational institutions (2007)

OE

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(al

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Source: OECDHigher drop-outs in market-based countries…

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10

20

30

40

50

60

in %

of

firs

t-ye

ar s

tud

ents

Precentage of students droping out of HEIs without degree (2008)

(1) only college


Intergenerational Mobility in Education

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Upward mobility Downward mobility Low Medium High

status quo by parents' education level

Intergenerational mobility in education (2009)

Percentage of 25-34 year-old non-students having an educational attainment higher than their parents (ascending mobility), a lower one (descending mobility) or the same (status quo) and status quo by parents' educational level (low, medium, high)

Note: The number of students attending higher education are under-reported for Australia, Canada, New Zealand and the United States compared to the other countries as they only include students who attained ISCED 5A, while the other countries include students who attained ISCED 5A and/or 5B. Therefore, the omission of data on 5B qualifications may understate intergenerational mobility in these countries.1. Data source from Adult Literacy and Life skills Survey (ALL) of 2006.2. Data source from Adult Literacy and Life skills Survey (ALL) of 2003.Countries are ranked in descending order of upward mobility.


…percentage of Graduates with debt…Most affordable Universities…..

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60

70

80

25: LouisanaTech University

20: AmherstCollege

15: BereaCollege

10: ColoradoSchool of

Mines

5: HarvardUniversity

4: BaylorUniversity

3: CaliforniaInstitute ofTechnology

2: PrincetonUniversity

1:Massachusetts

Institute ofTechnology

Most Affordable Universities: Percentage of Graduates with Debt


…Percentage of Graduates with debt……least 25 affordable universities…..


0

20

40

60

80

100

120

Least Affordable Universities: Percentage of Graduates with Debt

Percentage of Graduates with Debt

n/a

(source: Newsweek) Rankings of most 25 affordable universities….

0

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40,000

60,000

80,000

100,000

120,000

140,000

25: LouisanaTech

University

20: AmherstCollege

15: BereaCollege

10: ColoradoSchool of

Mines

5: HarvardUniversity

4: BaylorUniversity

3: CaliforniaInstitute ofTechnology

2: PrincetonUniversity

1:Massachusetts

Institute ofTechnology

Most Affordable Universities: Debts and Earnings

Total Price (on campus) Average Debt of Graduates Starting Median Salary Mid-Career Median Salary


THE World University Rankings (THE)

own calculations based on: http://www.timeshighereducation.co.uk/world-university-rankings/2012-13/world-ranking

33

2010/11 Rank 2012/13 Rank

Europe Mean (Median)

54,06 (52,2)

129 (140)

57,56 (55,6)

99 (106)

MinMax

46,283,4

20015

46,487,8

19912

(# in 200) 51 57

Anglo-Saxon Mean (Median)

63,4 (59,6)

61(78)

63,6(58,3)

70(94)

MinMax

46,296,1

1991

46,295,5

2001

(# in 200) 121 128

Asia Mean (Median)

58,6(55,4)

86(112)

61,7(58,7)

76(91)

MinMax

46,479,2

19721

48,278,3

18327

(# in 200) 27

european universities at the crossroads: more market or more … · 2012. 10. 17. · investments...

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