Nonparametric Estimation of Educational Production and Costs using Data Envelopment Analysis

158 Pages·2014·5.73 MB·English

by  Vincent Blackburn

International Series in
Operations Research & Management Science
Vincent Blackburn
Shae Brennan
John Ruggiero
Nonparametric
Estimation of
Educational Production
and Costs using Data
Envelopment Analysis
International Series in Operations Research
& Management Science
Volume 214
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Camille C. Price
Stephen F. Austin State University, TX, USA
Associate Series Editor
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Worcester Polytechnic Institute, MA, USA
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Vincent Blackburn (cid:129) Shae Brennan
John Ruggiero
Nonparametric Estimation
of Educational Production
and Costs using Data
Envelopment Analysis
VincentBlackburn ShaeBrennan
NewSouthWalesDepartment UniversityofCincinnati
ofEducationandCommunities Cincinnati,OH,USA
Sydney,NSW,Australia
JohnRuggiero
DepartmentofEconomicsandFinance
UniversityofDayton
Dayton,OH,USA
ISSN0884-8289 ISSN2214-7934(electronic)
ISBN978-1-4899-7468-6 ISBN978-1-4899-7469-3(eBook)
DOI10.1007/978-1-4899-7469-3
SpringerNewYorkHeidelbergDordrechtLondon
LibraryofCongressControlNumber:2014939291
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To my wife Kaija and daughters Maritta and
Emma for great support. Memories of Greg
Hancock for his inspiration and advice on
school finance research possibilities.
Vincent Blackburn
To my parents, Karen and Larry, and my
siblings, Anson, Vail, Reid, and Adelle,
for not only supporting me, but also
inspiring me to always do more.
Shae Brennan
ToJerryMiner,JohnRapp,andthememories
of Bill Duncombe and Larry Hadley, four
friendsandcolleagueswhomadeadifference
inmycareerandtaughtmetheimportanceof
giving back.
John Ruggiero

Preface
After working briefly in a management training program for a textile company,
IdecidedtoapplytothePh.D.programineconomicsatSyracuseUniversity.Iwas
fortunate to obtain a research assistantship working for Jerry Miner on a project
analyzing funding for public schools in New York. In addition to being kind and
fatherly, Jerry provided me with an incredible opportunity to work on a real
researchproject. Igainedvaluable researchskillsincluding aworking knowledge
ofSASprogramming.Ialsogainedvaluableexperiencemaintainingandupdating
thedataforthefundedprojectforruralschooldistricts.Alotofmymodestsuccess
inacademicscanbetracedtoJerry’ssupervisionandguidance.
In the early 1990s Bill Duncombe approached Jerry about using the education
datasettoanalyzeconsolidationofNewYorkschooldistricts.Billdidnothaveto
includemeontheresearchprojectbutdidso.Inadditiontocleaningandproviding
thedata,Billallowedmetoestimateeducationalcostsusingthestochasticfrontier.
At the time, I was learning the topic of efficiency measurement using data envel-
opmentanalysis.The projectwith Bill andJerryled tomyfirstpublication.More
importantly,Billtaughtmetheprocessofresearch.Inaddition,Billwasoneofthe
most valuable resources for my dissertation—I thanked him because he did more
thanoneshouldreasonably expect.Ittook memanyyearstorealizetheprofound
influenceBillhadonmycareer.Unfortunately,Ineverproperlythankedhimforhis
contributions. Bill passed away on May 11, 2013 after a brief battle with cancer.
Thankyou,Bill.
My interest in data envelopment analysis arose from a search on suitable
research topics given the education data set that I maintained for my research
assistantship.AtthetimeIwasmoreinterested infindingadissertationtopic that
wouldallowmetoexploitmydataset.Amongtheearly papers thatIfoundwere
DataEnvelopmentAnalysis(DEA)papersanalyzingeducation,andwereCharnes,
Cooper,andRhodes(1981),Bessent,Bessent,Kennington,andReagan(1982)and
Fa¨re,Grosskopf,andWeber(1989).TheNewYorkschooldatawasricherthanthe
onesusedinthesepapersandmyresearchtopicwaschosen.IobtainedallofRajiv
Banker’sworkingpapersfromCarnegieMellonandallpapersonDEAfromboth
the microeconomics and the operations researchers. At the time, Bill and Jerry
vii
viii Preface
obtainedfundingtoanalyzetechnicalandscaleefficiencyofschooldistrictsfora
coalition of rural school districts. We used the Banker and Morey (1986) DEA
modelstoallowforexogenoussocioeconomicfactors.Ibeganmyjourneyintothe
supporting literature on bureaucracies, including the work of Niskanen (1971,
1975) and Chubb and Moe (1990), and on educational production with Hanushek
(1979,1986)andCohnandGeske(1990).Eventually,allofthisworkwassynthe-
sized in my dissertation on educational efficiency. In the process, I developed a
competingmodeltocontrolforexogenousfactorsofproduction(Ruggiero,1996a).
This was the genesis of over two decades of research on performance evaluation
whichincludedapplicationstoanalyzeeducationalproductionofNewYork,Ohio,
Illinois,Dutch,andAustralianschools.Theseapplicationsfocusednotonlyonthe
measurement of technical efficiency (Ruggiero, 1996b) but also the causes of
efficiency (Duncombe, Miner, & Ruggiero, 1997), the measurement of education
costs (Duncombe, Ruggiero, & Yinger, 1996; Ruggiero, 1999), adequacy
(Ruggiero, 2007), and productivity (Johnson & Ruggiero, 2011; Brennan,
Haelermans,&Ruggiero,2014).
After I finished my dissertation, my goals were to finish up the research I had
started on efficiency measurement and move to other applied econometric work.
Nearly20yearsafterpublishingmyfirstarticleonefficiency,Icontinuetoworkin
thisarea.
I would like to acknowledge my coauthors who have written on the topic of
education (in order of publication date): Bill Duncombe, Jerry Miner, Johnny
Yinger, Stuart Bretschneider, Don Vitaliano, Lloyd Blanchard, Andy Johnson,
Sarah Estelle, Jaye Flavin, Ryan Murphy, Carla Haelermans, and Shae Brennan.
In addition to Jaye, Ryan, and Shae, Scott Knowles and Craig Letavec also
coauthored papers with me as undergraduate students. My former dean Matt
Shank encouragedme toworkon scholarshipwith undergraduate students aspart
of my additional goals as an endowed professor. The results include two research
articles (Blackburn, Brennan & Ruggiero, 2013; Brennan, Haelermans, &
Ruggiero,2014) and thisbook,with moreprojects inprogress.Theexperience of
workingwithShaehasbeenoneofthebestIhavehadasaprofessor.Iwouldliketo
thank Trevor Collier and Paul Bobrowski for allowing me to continue with these
goals;IamcurrentlyworkingonresearchprojectswithNikkiMazza,KaraColety,
Kristen Broadbent, Lesley Chilton, and Kelli Marquardt. Also, I have benefited
from useful discussions with Mariana Almeida, David Ausdenmoore, Leslie
Douglas, Paulo Henrique, Matheus Lambertucci, and Marco Mendes. And I
would be remiss not to acknowledge the support of Joyce Zanini, one of the best
workersattheUniversityofDayton.
Dayton,OH,USA JohnRuggiero
Contents
1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 EducationOutcomeProvision. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 DataEnvelopmentAnalysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 EducationalProductionandEfficiency. . . . . . . . . . . . . . . . . . . . 3
1.4 AustralianEducation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.4.1 NewSouthWalesSecondarySchoolSystem. .. . . .. . . .. 6
1.4.2 ProposedSchoolFundingandStaffingReforms. . . . . . . . 7
1.4.3 BudgetandStaffingDecisionsinOtherJurisdictions. . . . . 8
1.4.4 Implementing‘Gonski’SchoolFundingReforms. . . . . . . 8
1.5 OutlineofBook. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2 DataEnvelopmentAnalysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1 Technology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.2 TechnicalEfficiencyMeasurement. . . . . . . . . . . . . . . . . . . . . . . 15
2.2.1 Input-Orientation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.2.2 Output-Orientation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.3 ScaleEfficiencyMeasurement. . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.3.1 Input-Orientation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.3.2 Output-Orientation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
2.4 AllocativeEfficiencyMeasurement. . . . . . . . . . . . . . . . . . . . . . . 42
3 DEAinthePublicSector. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
3.1 Technology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
3.2 TechnicalEfficiencyMeasurement. . . . . . . . . . . . . . . . . . . . . . . 56
3.2.1 Input-Orientation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
3.2.2 Output-Orientation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
3.3 ScaleEfficiencyMeasurement. . . . . . . . . . . . . . . . . . . . . . . . . . 66
3.3.1 Input-Orientation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
3.3.2 Output-Orientation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
3.4 AllocativeEfficiencyMeasurement. . . . . . . . . . . . . . . . . . . . . . . 84
3.5 MultipleNondiscretionaryInputs. . . . . . . . . . . . . . . . . . . . . . . . 94
ix