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For-Profit College Entry And Cost Efficiency: Stochastic Frontier Estimates Vs Two-Year Public And Non-Profit Colleges, G. Thomas Sav

Economics Faculty Publications

This paper provides stochastic frontier cost and (in)efficiency estimates for private for-profit colleges with comparisons to public and private non-private colleges. The focus is on the two-year U.S. higher education sector where there exists the largest and fastest growing entry of for-profit colleges. Unbalanced panel data is employed for four academic years, 2005-2009. Translog cost frontiers are estimated with an inefficiency component that depends upon environmental factors defined by college specific characteristics. More experienced public and private non-profit colleges are found to be more cost efficient relative to the newer entrants. In addition, the newer for-profits exhibit greater efficiency variability …