Public and private universities: evolution of productivity and impact of the crisis
- 1Although the 33 private universities account for 40% of Spanish universities (83 in total), during the academic year 2016/17, they only comprised 14% of university students.
- 2The overall improvement in efficiency in universities brought about by the crisis has been more pronounced in public universities than in private universities, to the point that the level of efficiency of public universities has surpassed that of private universities.
- 3Despite a reduction in the resources of public universities between 2009/10 and 2013/14, their levels of production remained constant as the students enrolled when tuition fees increased (2012/13) had not yet graduated and most of the research underway in 2010 still produced results in 2013/14.
- 4The growth of the private university sector has not led to greater competition and transparency in higher education in Spain.
In the case of Europe, private universities tend to be smaller than public universities, which is why their weight in higher education systems is low. According to the most recent data from the European Tertiary Education Register (ETER), during the academic year 2014/15, nearly a third (32.6%) of European universities were private, although they accounted for only 24.1% of students enrolled in higher education in Europe. The case of Spain is not that different. Although the 33 private universities account for 40% of Spanish universities (83 in total), during the academic year 2016/17, they only comprised 14% of students.
Although both public and private universities operate within the same legal framework and are assigned the same fundamental tasks (teaching, research and knowledge transfer), public universities are constrained by greater regulation and stricter control mechanisms.
The differences that may affect the results obtained include those related to the faculty (private universities have greater flexibility as they do not have civil servants), the range of degrees (private universities tend to focus on a few areas of knowledge and postgraduate studies, whereas public universities tend to be more generalist) and the source of funding (public or private).
The results of the analysis conducted show that, in 2009/10, the greater flexibility of private universities led to a better relationship between their resources (teaching staff and matriculated students) and their production levels (in teaching and research). However, the economic crisis has caused an adjustment and a general improvement in efficiency, more pronounced in public universities than in private ones. So much so, that in 2013/14 the efficiency level of public universities surpassed that of their private counterparts. However, it is possible that this improvement in efficiency has been done at the cost of not being able to guarantee the production that emerges in the longer term, or it may have implied a reduction in quality.
1. The entry of the private sector in European and Spanish higher education
The university sector’s importance in society is widely recognised in practically every region around the world, since it trains professionals of the future in its classrooms, expands the frontiers of knowledge with its research and disseminates knowledge by transferring it to society.
Taking into account the above and due to the growing internationalisation of the economy, as well as the appearance of global league tables, competition between universities (public and private alike) has seen a notable increase, forcing their management to improve their results in order to attract the best teaching staff, the best students and the largest amount of funds possible. This has sparked reviews of methods that measure performance across their different activities. In the case of public universities, this revision has been accompanied by the introduction of practices developed in the private sector, permitting the introduction of what is known as the New Public Management (Barzelay, 2000).
Questioning public intervention in the market economy and bureaucracy it involves since the 1980s, this new paradigm is promoting the introduction of business management criteria and consumer orientation in public institutions, as well as the provision of what have traditionally been public services by private institutions in order to increase competitiveness. In the last decade of the 20th century its application resulted in an increase in the number of private universities, unprecedented in some countries, with many of them set up as for-profit organisations. European university systems, previously constituted by public universities and within a framework of generalised growth of higher education systems, were no exception in this sense.
This new scenario has led to rapid growth in the private university sector in Europe, within a context in which efficiency league tables are gaining relevance given the growing need to “do more with less”. For this reason, this study aims to contribute to the debate regarding the different management processes in public and private universities, and their efficiency and productivity levels, a field as yet unstudied in Spain and researched very little abroad.
Graphs 1 and 2 represent the evolution in the number of public and private universities in Spain and Europe, respectively. Both graphs show the aforementioned strong growth in the number of private universities that occurred from the 1990s onwards, based on data published in the European Tertiary Education Register (ETER), a database containing information from the EU-28 countries, the European Economic Area, Serbia and Turkey; and in the Register of Universities, Centres and Qualifications of the Ministry of Education, Culture and Sport (MECD) in the Spanish case.
It is worth underlining that, in Europe, the importance of private universities varies widely from one country to the next, and only in Cyprus, Poland, Portugal, the Czech Republic and Serbia are there more private universities than public ones. Furthermore, these private universities are usually much smaller than their public counterparts, therefore their weight in higher education systems is lower than it may seem from observing the graphs. According to the latest data from the European Register, although in the 2014/2015 academic year almost a third (32.6%) of European universities were private, they represented only 24.1% of students matriculated in European higher education. The situation in Spain is not very different. Although the 33 private universities represent 40% of Spanish universities (which total 83), during the 2016/17 academic year only 14% of university students attended them, meaning they are essentially small institutions (MECD, 2017).
2. Public and private universities: characteristics that may affect their performance
The public or private status of an institution will largely determine its objectives and the orientation of its visions, missions, strategies and areas of activity, with private institutions being mainly guided by market criteria and public institutions mainly by criteria more related with the provision of a public service to society. This difference in orientation necessarily gives rise to different management systems (and therefore different results), that will also be conditioned by the regulation differences in matters relating to control and the supervision of the activities and accounts of public and private universities.
Specifically, private universities enjoy greater flexibility which enables them to respond more quickly and efficiently to market changes. Furthermore, they usually focus on more profitable activities, usually teaching in knowledge areas with low costs and avoiding types of courses that require very expensive materials and facilities, such as engineering or medicine. Equally, private universities usually present low levels of research activity and of the transfer of results of any research for their use by society (Casani et al., 2014).
Consequently, debate regarding to what point the private university sector better responds to the needs of the economy and society remains open, throwing into question even classic arguments based on its higher graduation rates (Moreno-Herrero, 2010) and on lower levels of unemployment and higher salaries among its former alumni (MECD and Conference of University Social Councils, 2014) as a consequence of a better response to student needs. For some qualifications, it is unclear how far these results reflect the opportunities offered by private universities or depend on the high socioeconomic level of their students (Angoitia and Rahona, 2007).
For their part, public universities will include in their decision-making processes criteria related with the social benefits of their activity (among others). Furthermore, these are usually subject to greater rigidity as a consequence of stricter regulation, control and supervision of their activities and public accounts. In short, private universities theoretically have greater flexibility to adapt to a changing environment.
In the specific case of the Spanish university system, both public and private universities act within a single legal framework and are assigned the same fundamental tasks: teaching, research and transfer of knowledge. However, public universities are constrained by greater regulation and by more demanding control mechanisms than their private counterparts. The differences that may influence the results obtained by both university types, prominently include those related with the teaching staff, the range of qualifications offered, and funding.
Firstly, private universities in Spain enjoy greater flexibility in their personnel policies and the hiring of teaching staff, since their human resources do not include public servants and their workforce size is not subject to any public control. In contrast, in the case of public universities, approximately 45% of teaching staff are public servants, they cannot attract researchers of renowned prestige with high salaries and they can do little to recognise teaching staff productivity, since salaries are fixed by national and regional governments. Teaching productivity is recognised through five-year periods of teaching (and varies according to the teaching strategies and challenges pursued by each university). Meanwhile, research productivity is recognised through six-year periods of research (and the criteria for its recognition are established on a national level, being the same at all universities).
In second place, in relation with the range of teaching on offer, both types of universities must accredit their qualifications via Spain’s National Agency for Quality Assessment and Accreditation (ANECA) in order for them to be official in nature. However, private Spanish universities usually focus their qualifications around a small number of knowledge areas (social sciences, business studies, law and master’s and other postgraduate degrees), freely setting their matriculation prices and being able to decide how much time their academic staff devote weekly to teaching activities.
As for areas of knowledge, in the 2015/16 academic year nearly 25% of students enrolled at private universities were master’s students, and of these, around 75% were matriculated for courses related with the social and legal sciences (graph 3). In the case of public universities, only 9% of students took master’s degree courses and half of those (50%) matriculated in the areas of the social and legal sciences (graph 3).
In contrast, public universities usually have a more generalist orientation (in the sense that they offer qualifications belonging to a broad range of knowledge areas), their matriculation fees are determined by their regional governments and the legal framework in force establishes the annual number of hours that public university teaching staff must devote to teaching, indirectly determining the time devoted to teaching and research.
Finally, funding among public and private universities comes from different sources. The main part of the income of public universities, around 80%, originates from the public budgets, which are complemented with the matriculation fees paid by students based on the public prices set by the corresponding autonomous community. In contrast, the main source of funding for private universities is precisely the matriculation fees paid by their students (around 80%, but with important variations between different universities), followed by certain research funds (endowed chairs, projects, etc.) and other funds related with sponsorship and patronage.
However, the origin of funds for research is not vastly different, since around 57% of the funds of private universities come from public organisations (mainly from the regional and central governments) and some 43% come from private organisations, while for the public universities around 75% of the funds come from public organisations and 25% from private ones. Moreover, it is important to take into account that in relation with their global activity, the research activity of private universities is generally residual, which means that the total of research funds is very low (and depends mainly on public funding).
3. How to evaluate the efficiency and productivity of public and private universities?
The small size of the private university sector (especially in terms of number of students matriculated) and the difficulties for comparison resulting from the different management criteria for public and private universities mean that studies that compare the performance of both are scarce, above all due to the lack of data available on university systems in general and on private universities in particular. For this reason, studies that compare both subsectors usually focus on a descriptive analysis of their practices and on comparison of their volume of production.
In this article a further step is taken, and efficiency and productivity levels are compared over time. The terms efficiency and productivity are very much related to each other, but they measure different phenomena. Productivity measures the relationship between the quantity of resources employed and the quantity of production obtained. For example, a university with 10 hired teachers in which 20 students graduate each year, would have a productivity of 2 graduates per teacher. Thus, productivity does not assess whether the relationship between resources used and results obtained is adequate or not, nor does it indicate whether there are possibilities for improvement, but it does allow for comparisons between universities. Efficiency evaluates the relationship between resources used and results achieved, but in this case it is evaluated whether universities produce the maximum possible results or not given the resources they have available. For example, if the efficiency indicates that for 10 teachers the optimum production is 30 graduates a year, a university that had 10 teachers in its staff but only 20 students graduating a year would be inefficient, indicating that it could increase their results with the same consumption of resources, or reduce the resources used while maintaining their results. In addition, in calculating efficiency, several types of resources and results can be taken into account at the same time when evaluating universities.
Thus, through efficiency and productivity it is compared the capacity of public and private universities to transform their resources (teaching staff and matriculated students) into results in teaching (graduates) and research (scientific articles). Furthermore, the comparison is made for two points in time: the academic years 2009/10 (once the Bologna Process was established) and 2013/14 (the last academic year for which data are available at the time of the study). Table 1 shows the data for the resources and results taken into account to calculate the efficiency and productivity of public and private universities at both points in time, as well as the results in terms of productivity.
There are few prior studies that compare the levels of efficiency and productivity of public and private universities, and all of them come from abroad. After the initial publications in the 1980s for the United States (e.g. Rhodes y Southwick, 1986), the more current studies have been carried out for developing countries, as in such countries the private university sector is acquiring growing importance in order to thus complement what are generally meagre higher education systems, given the incapacity of their governments to respond to the demand for these services (Jamshidi et al., 2012). The results of these studies are varied and no clear indications exist on the greater or lesser efficiency and productivity of public or private universities. This article first of all calculates the efficiency of each university, then the average of the efficiency for public and private universities respectively, and finally, these average results are compared.
4. Increasingly close efficiency levels between public and private universities
In the 2009/10 academic year, private universities were more efficient than their public counterparts, as they were more productive. However, it is important to clarify that the levels of efficiency and productivity among private universities varied widely, with some universities showing very high performance levels and others with very low levels. In contrast, the differences between public universities were smaller.
In other words, in 2009/10 the flexibility of private universities enabled them to better adjust their human resources and their production in teaching and research, being more productive and efficient. However, in 2010 the financial and economic crisis led to a reduction in public spending assigned to public universities. Furthermore, in 2012 the matriculation prices of public universities were strongly increased. Therefore, given the smaller difference in the costs of studying at a public or private institution, from that year the number of students matriculated at private universities has increased (by 22.20% between 2010 and 2014, see table 1). Moreover, public spending cuts meant lower rates of replacement of retired staff at public universities, which among other factors brought with it a reduction in teaching and research staff of 16.55%, while private universities increased their numbers of matriculated students, a fact that led partially to the increase in their teaching and research staff by 12.41% (see table 1).
Despite the reduction in resources of public universities between 2009/10 and 2013/14, their production levels have been maintained, since students who matriculated in the academic year in which matriculation prices increased had not yet graduated in 2013/14, and the large part of the research underway in 2010 still produced research results in 2013/14. It may be expected that these results will not be maintained in the long term.
In the academic year 2009/10, the most efficient universities in Spain (all of them with the same level of efficiency), were the Autonomous University of Barcelona, the Autonomous University of Madrid, Pablo de Olavide University, Pompeu Fabra University and the University of Vigo, among the public universities. Among the private universities, the IE University, the University of Navarra, and the Pontifical University of Salamanca were the most efficient (table 2).
In fact, in the academic year 2013/14 (the last period of our study), the only universities remaining among the most efficient are large universities with a capacity to compensate for the reduction in resources assigned to research using international funds, above all from the European Framework Programmes in Research and Technological Development: among public universities, the Autonomous University of Barcelona, the Autonomous University of Madrid and the Pompeu Fabra Universities; and among the private ones, IE University and the University of Navarra (see table 2).
Over the course of the four years, the situation of private universities has worsened with respect to public universities because the latter have increased their productivity (table 1), surpassing the efficiency of the private universities.
However, these results are partial. In Spain, over the last decade, there has been major progress in the availability of data on the university system, but in an unbalanced way between public and private universities, with the data available for the latter being extremely scarce. Thus, analysing the performance levels of private universities is still complicated due to a lack of data for this sector. In fact, the total annual expenditure of universities would have represented a better approach to the resources that they can access, and furthermore it has not been possible to measure the amount of knowledge transfer carried out by private universities.
The formulas used by the New Public Management and the phenomenon of global league tables are encouraging a more entrepreneurial style of management in higher education. This new scenario has led to rapid growth in the private university sector in Europe (and in Spain), within a context in which efficiency rates are gaining relevance given the growing need to ensure the maximum benefit from public resources.
The increase of private universities has not led to any increase in the sector’s transparency, since the data available on them are still very limited. The greater competition that they were supposed to introduce (in Spain and Europe alike) and their capacity to respond to Spain’s socioeconomic needs could even be placed in doubt, given the still small size of the private sector (in terms of matriculated students) and their activity being restricted to those fields of teaching that involve little investment and are especially profitable.
The results show that private universities boast greater flexibility and capacity to adjust their production and efficiency levels autonomously, and that in recent years, public universities have increased their efficiency, partly because the reduction in public funding has led to public universities obtaining similar results (production levels in teaching and research) with fewer resources thanks to the inertia maintained by both teaching and research activity even in a period of deceleration of investment in the university sector.
These preliminary results must be evaluated taking into account several factors. The first is that efficiency and productivity measures constitute only one of the dimensions of universities to be evaluated. It is necessary to complement the study with further research, at least on the quality of the results (for example, in terms of employability, internationalisation, development of competencies, etc.), before being able to support public policy decisions. The second reason is based on the fact that the results will only reflect the effects of the economic crisis in the short term. When more recent data are published, it is to be expected that these funding restrictions of public universities will also lead to a reduction in their production levels in the medium-long term, since the effects will be seen in the number of graduates and of high-impact scientific publications.
In other words, despite the results described in this article, we can only affirm with all certainty that the cuts in the public university sector have had positive consequences in the short term and in terms of efficiency and productivity, since there are important dimensions of university performance that remain outside the boundaries of this study due to the long time period needed to be able to observe their evolution. And finally, it is also important to bear in mind the lack of financial information and knowledge transfer data for private universities.
In summary, this study constitutes a first approach for the comparative measurement of productivity and efficiency of public and private universities. This type of study may be extremely useful in the future for university leaders and managers, as well as for those with related political responsibilities. The flexibility of private universities may enable them to take advantage of this type of analysis and convert it into initiatives to increase their efficiency and move in the direction of those universities considered to be benchmarks. Furthermore, public universities are more dependent on public policies and funding, and could benefit in the medium-long term from policies formulated based on the empirical evidence provided by this and other scientific studies on university systems in general, and on the Spanish system in particular.
Angoitia, M., and M. Rahona (2007): «Evolución de la educación universitaria en España: diferentes perspectivas y principales tendencias (1991-2005)», Revista de Educación, 344.
Barzelay, M. (2000): «The new public management: a bibliographical essay for Latin American (and other) scholars», International Public Management Journal, 3(2).
Casani, F., D. De Filippo, C. García-Zorita and E. Sanz-Casado (2014): «Public versus private universities: assessment of research performance; case study of the Spanish university system», Research Evaluation, 23(1).
European Tertiary Education Register (varios años): ETER data [www.eter-project.com].
Jamshidi, L., H. Arasteh, A. Navehebrahim, H. Zeinabadi and P. D. Rasmussen (2012): «Developmental patterns of privatization in higher education: a comparative study», Higher Education, 64.
Malmquist, S. (1953): «Index numbers and indifference surfaces», Trabajos de Estadística, 4(1).
Ministerio de Educación, Cultura y Deporte (MECD) (varios años): Estadísticas e Informes Universitarios.
Ministerio de Educación, Cultura y Deporte (MECD) (2017): Registro de Universidades, Centros y Títulos (RUCT).
Ministerio de Educación, Cultura y Deporte (MECD) y Conferencia de Consejos Sociales de Universidades (2014): Inserción laboral de los egresados universitarios. La perspectiva de la afiliación a la Seguridad Social. Primer Informe, Madrid: Conferencia de Consejos Sociales de Universidades.
Moreno-Herrero, D., and L. Navarro-Gómez (2010): «Costes comparados de las universidades españolas privadas y públicas», Estudios de Economía Aplicada, 28(2).
Rhodes, E., and L. Southwick (1986): Determinants of efficiency in public and private universities, no publicado, School of Environmental and Public Affairs, Bloomington: Indiana University.
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