Comparing university tuition fees with PBRF performance

Introduction

As recently as 2004, there was little or no official information available on the quality of individual tertiary education organisations (TEOs).¹ The situation has improved slightly in recent times, with the publication of the results of the PBRF Quality Evaluations, but these measure just one dimension of university performance – research quality. Therefore, in deciding which courses to do and/or which institution to attend, potential participants in tertiary education are reliant to some degree on information provided by family, schools or peers to make their choices.

In the vacuum created by this lack of detailed information on university performance, there is some evidence that students also use the price of a course as a proxy measure for its quality. Holdsworth and Nind (2006) surveyed over 500 senior secondary school students from around New Zealand about the main factors influencing their decision to attend a particular university. Their research showed that the quality and flexibility of the qualifications/courses were the most important factor in student choice. This was followed by the likelihood that employers would recruit from the institution. However, the authors also found that the students in the survey preferred the course they chose to be either the same cost or more expensive than a similar course at another institution. This implies that students may be inferring the quality of the course from its price.

This paper explores the issue of inferring quality from price by analysing the association between the price of bachelors-level tuition at New Zealand universities with the results of the Performance-Based Research Fund (PBRF) Quality Evaluation. The objective of the analysis is to see how closely the price of tuition for students is associated with the quality of research produced by universities. The results will indicate how well price works as a proxy for the quality of a university, at least in terms of quality of research.

Obviously, quality of research captures just one dimension of university performance. Other important measures of quality would include the quality of teaching and the way employers perceive the graduates from a particular university. However, official data at the subject level for these measures is not publicly available at the present time.² Therefore, the focus of this study is, by necessity, on comparing price with research quality.

Note that in the absence of other comparable measures of performance, the universities have used the PBRF Quality Evaluation results to market themselves to potential students. For example, the University of Auckland use their PBRF results as a measure of their national reputation.³

Given that domestic tuition fees have been subject to some form of government regulation since 2001, the time frame used in this analysis requires careful selection. For the purposes of this study, the tuition fees charged in 2003 are compared with the results of the 2003 PBRF Quality Evaluation. Effectively, these tuition fees represent the fees charged in 2000, the last year before fees were frozen under the government’s fee stabilisation policy. Therefore, the fees reflect the strategic price setting decisions of the universities in 1999, which happens to be in the period of the work assessed in the 2003 PBRF Quality Evaluation. So there is an alignment of sorts between the quality of research as assessed in the first PBRF Quality Evaluation and the price charged at the time the first results were published.

After 2003, fees were regulated under the government’s Fee and Course Costs Maxima (FCCM) policy. Undergraduate domestic tuition fees above the maxima were required to reduce,⁴ while fees below the maxima could increase by a maximum of 5 percent. As a result, the relative difference between the fees of universities is being reduced by government regulation and not necessarily by the decisions of the universities. Therefore, using current levels of fees would not allow for a clear undiluted analysis of the pricing strategies of the universities.

The structure of this paper is as follows. First, trends in domestic fees at universities between 1991 and 2000 are examined. Then, the data used in the paper is presented. This is followed by the presentation of the results of the analysis which is followed by some final conclusions.