The productivity performance of universities

This paper presents new evidence on research and teaching productivity
in universities using a panel of 102 top U.S. schools during 1981-1999. 
Faculty employment grows at 0.6 percent per year, compared with growth
of 4.9 percent in industrial researchers.  Productivity growth per
researcher is 1.4-6.7 percent and is higher in private universities. 
Productivity growth per teacher is 0.8-1.1 percent and is higher in
public universities.  Growth in research productivity within
universities exceeds overall growth, because the research share grows
in universities where productivity growth is less.  This finding
suggests that allocative efficiency of U.S. higher education declined
during the late 20th century.  R&D stock, endowment, and post-docs
increase research productivity in universities, the effect of
nonfederal R&D is less, and the returns to research are
diminishing.  Since the nonfederal R&D share grows and is higher in
public schools, this may explain the rising inefficiency.  Decreasing
returns in research but not teaching suggest that most differences in
university size are due to teaching.

Here is the full paper.  Here is a non-gated version

I take "the returns to research are diminishing" to be the fundamental point.  The authors also find that private universities are about twice as research productive as public universities, and that private universities have a higher rate of research productivity growth.  Public universities have superior teaching productivity.

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