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International Handbook on the Economics of Education

Edited by Geraint Johnes and Jill Johnes

This major Handbook comprehensively surveys the rapidly growing field of the economics of education. It is unique in that it comprises original contributions on an exceptional range of topics from a review of human capital, signalling and screening models, to consideration of issues such as educational externalities and economic growth, funding models, determinants of educational success, the educational production function, educational standards and efficiency measurement. Labour market issues such as the market for teachers and the transition of students from school to work are also explored.
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Chapter 15: Multi-product Cost Functions for Universities: Economies of Scale and Scope

Elchanan Cohn and Samuel T. Cooper


Elchanan Cohn and Samuel T. Cooper Introduction The structure of knowledge began to change radically in the late nineteenth and early twentieth centuries. Although these changes did not originate in universities and colleges, they were to affect them greatly. . . . In higher education, a different set of wide-ranging changes transformed what was taught, who taught it, and how it was taught. They created a new relationship between research and teaching and affected both the scale and scope of higher education. . . . Most of these changes also served to increase economies to scale and to raise the number of faculty members and students that were required to remain viable. . . . In 1897, the median private institution [in the USA] had only 130 students; the median public-sector institution, at 240 students, was not much larger. . . . As we approached the turn of the twenty-first century, the median number of students per institution was about 1600 in the private sector and almost 8200 in the public sector. (Goldin and Katz, 2001, pp. 8–9) Universities and colleges, wherever they are located, must be considered multi-product enterprises. As Goldin and Katz (2001) point out, ‘the typical American university as it emerged at the beginning of the twentieth century was a veritable department store of higher education services’ (p. 9). Among the outputs produced in the typical institution of higher education (IHE) are knowledge creation (research) and knowledge dissemination (teaching). Public service is another output. The ‘public service function in American higher education is . . . an...

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