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Persistent inefficiency in the higher education sector: evidence from Germany

ABSTRACT Utilizing panel data and taking heterogeneity and persistent inefficiency into account, we show the limitations of standard efficiency analysis for higher education institutions. It is the first time that the concept of long-term inefficiency is considered in the analysis of traditional universities. This inclusion allows for more accurate estimations and more purposeful policy recommendations. The new specification improves the accuracy of the heterogeneity assumption and exposes inefficiency’s tendency to be persistent. Thus, this paper finds that an efficiency increase can be achieved only if future measures aim at long-term conditions, which are presumably determined outside of individual institutions.