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THE APPLICATION OF STOCHASTIC FRONTIER ANALYSIS FOR MEASURING ‘TECHNICAL EFFICIENCY’ FOR POLICY DECISIONS: THE CASE OF NATIONAL UNIVERSITIES IN SRI LANKA

Abstract

This study investigates the firm-specific efficiency and disguised unemployment in ten national universities as one of the policy decisions, followed by identifying the causes of technical efficiency, using an econometrics technique over the period from 1999 to 2003. The study is conducted in two stages. The first stage is to measure the technical efficiency. The second stage explores with the causes of technical efficiency. The inputs included are the full-time academic staff members, capital expenditure on equipment, library books periodicals and furniture, academic services expenses and administration expenses. It considers a number of graduates as the teaching outputs. Using stochastic frontier analysis techniques technical efficiency is calculated for ten national universities separately. The first stage results indicate that efficiency of all national universities have a slightly decreasing trend on average from 80% to 78% over the time period. The average firm level efficiency ranges from 53% to 93%, reporting “H” university as the lowest and “C” university as the highest. As all the national universities are not performing at their maximum capacity, it leads to disguised unemployment, which is calculated for included inputs. The proportion of senior lecturers, the staff-student ratio, the size of the universities, the proportion of undergraduates who study in the arts stream and the time trends are the causes of technical efficiency according to the results of the second stage analysis. Therefore, introducing a proper evaluation system for resources, stimulating competition, introducing an integrated operating system, giving priority for the staff development and customizing the “Arts” degree programme according to the market requirements, will be helpful to enhance the technical efficiency of national universities, though it is a challenge to the sector.

Keywords: Disguised Unemployment, Firm-specific Technical Efficiency, National Universities, Stochastic Frontier Analysis

 

For full paper: fmscresearch@sjp.ac.lk


Author Biography

B.N.F. Warnakulasooriya

Professor, Department of Marketing Management,
Faculty of Management Studies and Commerce,  University of Sri Jayewardenepura, Sri Lanka.

P.G.S.A. Jayarathne

Department of Marketing Management,
Faculty of Management Studies and Commerce,  University of Sri Jayewardenepura, Sri Lanka.