Cost Efficiency in ARL Academic Libraries

ABSTRACT Eighty eight academic member libraries of the Association of Research Libraries (ARL) are examined to determine their relative cost efficiency. Two frontier methods are used to measure overall cost efficiency and the results from the two methods are compared. The two methods are stochastic frontier regression and data envelopment analysis (DEA). The DEA method used assumes variable returns to scale. Both of the methods give average ARL cost efficiencies of around 80%. This places academic ARL libraries in the same range of efficiency as other institutions, including for-profit and non-profit institutions. Many libraries are above 80% efficiency. For those that are below, some speculation is given for the lower efficiency. The lack of an output measure for the use of electronic sources may contribute to lower efficiency for a few libraries. Large staff size and a large number of serial subscriptions do predict lower efficiency, but this is not a necessary consequence. The DEA model allows us to determine increasing, constant, or declining returns to scale for research libraries. From this it appears as though research libraries with expenditures between $10,000,000 and $20,000,000 are operating at the most efficient scale. Since the methods used are outside the repertoire of most LIS research, a conceptual explanation is provided