Higher education production function: applications, challenges, and prospects

Developing an appropriate scientific and technical tool to analyze, examine and evaluate decisions, activities and performance of higher education units at different levels has been always a crucial issue and task. The purpose of this research was to explore and examine many types of essential applications of production function in analyzing higher education issues along with identifying facing problems and challenges. Using an analytical-critical approach in a comprehensive approach framework, the mission and nature of higher education are discussed. Then, eleven strategic applications of the production function in the context of firm theory including identifying rational production region, prediction of outputs, evaluating the effects and share of production factors, evaluating efficiency and effectiveness of higher education units, examining the economies of scale, ranking universities, etcetera are proposed and elaborated. It is also specified that the applications are faced with a variety of problems and challenges such as the nature of multiple outputs of higher education, diversity of effecting factors, quality assessment challenges, hierarchical structure of data and activities, specification and identification of the function, appropriateness of estimation methods, and selection and endogeneity problems. The results indicated that ignoring the issues and problems critically affect the usefulness of the applications in policy making and administering decisions. At the end, ways to overcome most of the mentioned problems and challenges and the maximum use of applications in policy makings and decision makings are discussed.