University efficiency and public funding for higher education in Bulgaria

The recent pressure on public finances in Bulgaria has exposed the need for a performance-based system of public funding for higher education. This article estimates the relative technical and cost efficiency of Bulgarian universities and explores the correlation between public funding and efficiency levels. In particular, a recent government proposal to use university rankings for the allocation of funds is evaluated with regard to efficiency. The results indicate that public universities are less efficient than private institutions, especially in teaching-related aspects. A larger share of the education market, fewer fields of study and more science-related majors result in efficiency gains. Efficiency is not a significant determinant of the amounts of subsidy allocated to a university, while the rankings of efficiency and funding are found to be negatively correlated. However, the rankings to be used under the proposed policy are positively related to cost efficiency, suggesting that the reform effort is a step in the right direction.