The Cost Structure of Higher Education in Further Education Colleges in England

This paper examines the cost of the provision of higher education courses within further education colleges in England. The further education sector is complex because of the wide range of courses it provides both in terms of subject type and of qualification level. We believe this to be the first attempt to fit a cost function specifically to the further education sector. Cost functions for a sample of 96 colleges over a two-year period, from 2000 to 2002, are fitted using a panel data methodology as well as stochastic frontier analysis. Our findings indicate that most further education colleges are able to benefit from economies of scale. Results from both methodologies suggest the presence of product-specific economies of scale, substantial ray economies of scale and that higher education classroom-based courses, such as business studies, along with vocational courses display substantial economies of scope.