Efficiency and Productivity in Finnish Comprehensive Schooling 1998-2004

This study measures efficiency differences and productivity changes of Finnish municipalities providing comprehensive school education during 1998-2004 by estimating both production and cost functions. The average inefficiency was approximately 6-10 percent during 1998-2004 based on both production and cost function estimations. Both approaches also produced very similar inefficiency rankings for the municipalities. Based on the results of cost functions, both the size of the municipality and average school size had a nonlinear impact on costs. The optimal municipal size was approximately 24 000-37 000 inhabitants and optimal school size was 690 students. The share of students in remedial instruction, the share of students using transportation, and taxable income per inhabitant had a positive impact on costs whereas the share of students in lower school decreased the costs. The productivity of the comprehensive schools decreased on average 12 percent during the period. The increase in per capita taxable income and the share of students in remedial instruction had the biggest impact on the productivity decrease whereas the increase in school size clearly enhanced productivity.