Data Envelopment Analysis of Productivity Changes in Higher Education For-Profit Enterprises Compared to Non-Profits

Data envelopment analysis is used to compare private for-profit colleges to publicly owned colleges in terms of their operating efficiency and productivity. Academic year 2005-09 panel data is used for two-year institutions in the U.S. Results indicate that for-profit efficiency exceeded that of public colleges. Malmquist index results show that colleges in both sectors increased managerial and scale efficiencies, but that both were hindered by technological regress to the extent that overall productivity declined. 2007-08 created efficiency declines across the board, but for-profits managed large technological gains that produced the only annual productivity improvement for either sector. The results are important for better understanding the increasing privatization of higher education through the entry of for-profit institutions and for understanding the inter-sector differential effects and responses to the global financial crisis