Cost Inefficiencies and Rankings of Ivy Universities: Stochastic Panel Estimates

This paper employs stochastic frontier analysis in providing estimates of the operating cost inefficiencies of private non-profit and public ivy universities in the U.S. Panel data for academic years 2005-09 is used to estimate cost frontiers under two alternative specifications that lead to estimated gross and net inefficiencies. Time varying inefficiencies are reported for each academic year and used to calculate university inefficiency rankings by sector. The results suggest that private ivy universities are less inefficient or more efficient than their public counterparts. However, public ivies appear to have made significant inefficiency adjustments perhaps in response to the global financial crisis. Absent those adjustments among the private ivies, the inefficiency gap between the two sectors is found to have substantially narrowed.