Revenues, ultimate sovereigns and resource allocation at Finnish, Swedish, UK and US universities

Abstract

This article explores how the level of funding and the governance model at universities are related to their resource allocation, measured as the balance between faculty and other personnel. Data from 2019 are used to construct scatterplots of the relationship between other personnel per faculty and revenue per faculty in the UK, the US, Sweden, and Finland. The study indicates that the more financial resources a university has, the more the workforce will be dominated by nonfaculty. This is explained by Bowen’s revenue theory of cost: universities raise all the money they can and spend all they raise. Institutions that limits their growth in order to maintain exclusivity are particularly prone to amass large economic resource and attain a high nonfaculty to faculty ratio. However, resource allocation can also be affected by the governance model. Where faculty elect the university board, faculty also comprise a larger share of the personnel. This might be explained by Tullock’s theory of the politics of bureaucracy: middle management is loyal to the ultimate sovereign, which elects the university board, and if this sovereign is the faculty, middle management will allocate resources to what it believes is in the interest of faculty, such as teaching and research. For example, Oxford and Cambridge, where the ultimate sovereign is a large collegial body consisting of almost all teachers and researchers, achieve positions in international university rankings comparable to those of the top US universities at a fraction of the cost.

Keywords

• revenue theory of cost
• politics of bureaucracy
• university governance

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