Higher Education Funding Models and Institutional Effectiveness: Empirical Research of European Experience and Russian Trends

Abstract

World Bank data shows that education accounts for, on average, 13% of government expenditure in the world, effective spending being a priority. Position in international academic rankings has been a universally accepted, yet criticized, criterion of institutional effectiveness. No consistent positive correlation was revealed during research on how the size of government subsidies affected university ranking. Assessment methodology is adjusted to study the influence of public funding mechanisms on university ranking. Three mechanisms are investigated: formula based funding, performance based funding, and negotiated funding. The sample includes 107 European universities from 27 countries. For each of them, information on the funding model (or a combination of models), total annual revenue, proportion of public subsidies, ranking and ranking movements over the last decade is collected. Analysis results are used to group universities into two major categories: low-ranking universities (ranked in the top 200–500), which are mostly funded using formal mechanisms (formula- and performance based funding), and high-rankings universities (the top 100), which largely use the negotiated funding model (either alone or combined with formal models). This confirms previous research findings that the size of government subsidies has no impact on university ranking. A qualitative analysis of higher education funding patterns in Russia is performed. Formalization of all sources of university funding has become a major trend, yet this empirical study demonstrates that prioritization of formal criteria may be ineffective if Russian universities want to reach their ambitious goals of making it to the top 100 in international rankings.