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Dominic Orr and Alex Usher

Performance-based funding (PBF) is an example of the instruments of governance introduced to higher education systems during the last two decades in the context of higher education expansion. Through changing the incentive structure, it aims to intensify the focus of higher education institutions (HEI) on their performance, including fostering student performance. Despite the evidence that PBF systems appear to have a low system-wide impact on HEIs, they are still politically significant because they emphasise certain types of performance over others and therefore have a norm-setting function. In this context, the chapter reviews the indicators being used to measure student performance and closes with a discussion of future challenges for PBF systems aiming to more closely reflect changes in students’ pathways to success.