How students' exogenous characteristics affect faculties’ inefficiency. A heteroscedastic stochastic frontier approach

By using a heteroscedastic stochastic frontier model, this paper focuses on how students' exogenous characteristics (such as personal demographic information, pre-enrollment educational background and household economic status) affect faculties’ inefficiency. Using individual data on freshmen enrolled at a public owned university in Italy over the 2002-2008 period, we focus both on the direction of this influence on technical inefficiency and on the magnitude of the related partial effects. A measure of R2 has also been calculated in order to evaluate the overall explanatory power of the exogenous variables used. The empirical evidence reveals the validity of the heteroscedastic assumption, giving credit to the use of some students’ individual characteristics according to which the inefficiency is allowed to change. Moreover, the estimates suggest that the university could improve the students’ performances by investing in labour inputs.