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Efficiency Analysis of New Zealand Universities in the Australasian Context

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Date

2025

Authors

Supervisor

Winchester, Niven
Meehan, Lisa

Item type

Thesis

Degree name

Doctor of Philosophy

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Publisher

Auckland University of Technology

Abstract

This thesis investigates the productivity and efficiency of New Zealand universities from 2008 to 2018 compared to Australian universities. It applies both Malmquist productivity indexes (MPI) and stochastic frontier analysis (SFA) to a consistent dataset across both countries. Enhancing university efficiency and productivity is vital for ensuring the competitiveness and sustainability of New Zealand universities. The university sector faces constrained public funding and rising expectations for educational outcomes. However, existing studies on New Zealand university productivity and efficiency are scarce, with few employing comprehensive methodologies or quality-adjusted output measures. This study addresses these gaps. First, it applies both MPI and SFA to provide robust assessments of productivity and efficiency. Second, it introduces quality-adjusted output measures to improve the validity of evaluations. Third, it systematically explores inefficiency determinants using the Battese and Coelli (1995, known as the BC95) model. Finally, it examines the sensitivity of the results to alternative variable measures and presents efficiency scores in a clear and consistent way. The first empirical analysis examines partial labour productivity in teaching and research. Findings indicate that, despite steady improvements, New Zealand universities had lower productivity than Australian universities, with a notable persistent productivity gap between universities in the two nations. However, when productivity is assessed using all inputs, including capital, the results are less positive, suggesting that improvements in labour productivity have not translated into broader efficiency gains. The MPI captures changes in total factor productivity (TFP) by accounting for multiple inputs and outputs. Results show that New Zealand universities experienced an average annual decline in TFP of 0.7% due to efficiency declines (-1.4%) despite modest technological improvements (0.6%). In contrast, Australian universities achieved annual TFP growth of 1.6%, driven by both technological progress (1.3%) and efficiency gains (0.3%). The second empirical analysis applies the BC95 model to estimate technical efficiency using SFA. Results suggest that New Zealand universities were more technically efficient than Australian universities, reflecting their smaller and more research-focused system. This outcome is partly due to differences in defining undergraduate completions: New Zealand includes sub-degree completions while Australia does not. This may bias results in favour of New Zealand institutions. The inefficiency analysis also reveals that larger percentages of international and female enrolments are related to lower efficiency, and regional effects also matter. The third empirical analysis applies a stochastic cost frontier analysis (SCFA) using the BC95 model to examine cost efficiency across universities. Results indicate that Australian universities, particularly the Australian Technology Network (ATN) universities, are more cost-efficient than New Zealand universities. Differences in income sources, financial capacity to invest in staff and infrastructure, and institutional size potentially explain this gap. Across universities, several characteristics are associated with cost efficiency. Universities with medical schools and higher proportions of female students tend to have lower cost efficiency. In contrast, universities with larger shares of international students and higher general-to-academic staff ratios are more cost-efficient. Regional variations in cost efficiency outcomes are also observed, suggesting that geographic location may influence university operating environments. The comparative results show that methodological differences (MPI, SFA, SCFA) capture distinct aspects of productivity and efficiency, they are not contradictory. Instead, they reflect different purposes and address research questions. New Zealand universities may appear more technically efficient but less cost-efficient, while Australian universities benefit from economies of scale, revenue diversification, and stronger resource capacity. Efficiency outcomes are also shaped by contextual factors such as programme definitions, institutional scale, funding structures, and regional conditions. Recognising these differences is essential to avoid misinterpretation, and incorporating quality-adjusted measures provides a more comprehensive and meaningful assessment of university performance. Overall, this thesis highlights the need for funding models that are flexible, equitable, and responsive, alongside strategic investment in staff, infrastructure, and digital technologies. It stresses the importance of diversifying income sources to reduce reliance on international tuition, while ensuring targeted support for regional and specialised universities. Addressing discipline-based imbalances, embedding quality-adjusted measures in performance frameworks, and strengthening data quality are also critical for thorough assessment and evidence-based policy. These findings provide notable insights for policymakers and university leaders aiming to enhance performance and sustainability in New Zealand universities.

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http://hdl.handle.net/10292/19807

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