Performance-based resource allocation for higher education institutions in China

How to allocate limited resource to higher education institutions has always been a critical problem with significant social and economic relevance. Researchers and educational administrators have long proposed that resource allocation should be linked to performance. In this paper, we develop a performance-based method for a central planner to allocate research funding to different universities to better stimulate the research output. The method builds on existing works on resource allocation via efficiency analysis. The method takes multiple dimensions of research performance into account, including number of publications, number of patents, and revenue from knowledge transfer. We apply the method to a set of 64 major universities in China based on performance in 2014-2016. The application is particularly pertinent at the moment, since the Chinese government is developing a new funding program called the "double first-class" plan, which features performance-based funding as a central pillar of government funding.