Higher education plays a more prominent role in OECD member and partner countries today than it did a half-century ago. It educates many more learners and it is increasingly expected to make key contributions to economic innovation, public health and social well-being. Higher education is also much more costly than it once was, due both to these expanded responsibilities and chronic difficulty in identifying ways to boost the productivity with which it carries out its missions. Burgeoning responsibilities and costs have brought heightened scrutiny on the part of governments and households, who expect higher education systems and institutions to demonstrate that they are making sound use of the resources with which they have been entrusted.

Investment in higher education in OECD countries has increased substantially over the last 20 years, largely because of higher enrolment, increasing costs, government priorities related to skills, and research and innovation. Public authorities in OECD member and partner countries regularly need to make and justify decisions about how to mobilise, allocate and manage financial and human resources in higher education. This can be challenging, as not only are the effects of individual policy choices difficult to predict and prove, but the core objectives of higher education – notably the quality of student learning – are hard to measure. Despite these limitations, knowledge of international trends, alternative policy approaches, and evidence from research, evaluation and the practical experience of peers in other countries can be invaluable for those making crucial policy decisions in higher education.

This chapter provides a rationale for analysing financial and human resources in higher education, and an overview of the analytical framework proposed for conceptualising these issues in the OECD Higher Education Resources Project. Investment in higher education in OECD countries has increased substantially over the last 20 years, largely as a result of higher enrolment, increasing costs, government priorities related to skills, and research and innovation. Public authorities across the OECD regularly need to make decisions about how to mobilise, allocate and monitor the use of resources in higher education. In this context, knowledge of international trends, alternative policy approaches, and evidence from research, evaluations and the practical experience of peers in other countries can be invaluable for domestic policy making. Such information is currently dispersed and often difficult to access. The OECD Higher Education Resources Project – informed and guided by the analysis in this report – aims to respond to this situation by providing an accessible international evidence base for policy makers and targeted system-specific analyses.

This chapter examines the way financial resources are mobilised for higher education systems, focusing on two basic questions all systems must answer: what level of financial resources should be raised for higher education and where will these resources come from? This chapter notes the increasing costs of higher education that necessitate rising levels of resource mobilisation, outlines constraints that shape resource mobilisation, and offers examples of the different choices governments have taken about “what level of resources to mobilise, and where from.” In higher education systems where household resources are mobilised, decisions must be taken about who will pay, how much they should pay and how households should be assisted in meeting study costs. The question of financial aid to students is taken up in Chapter 3, while the processes by which public revenues are allocated to higher education institutions are taken up in Chapter 4.

This chapter examines undergraduate student fees and financial support, commencing with who sets tuition fees, who pays fees, and the impact of tuition fees on enrolment. It subsequently focuses on how students are assisted in meeting study costs, both through non-repayable support (grants and tuition waivers) and student loans, examining their design, costs, management and their effect on enrolment and student outcomes.

This chapter examines the allocation of public funding to higher education institutions, with a particular focus on funds provided for core operating expenses. In many jurisdictions, public core funding is provided to institutions primarily, or exclusively, to cover the costs of educational activities, while research and engagement activities are supported through separate, targeted, funding streams. Separate public funding arrangements frequently also exist to fund capital investment. The chapter examines who is responsible for the allocation of operating funding to higher education institutions, how funding levels are set, and how funds are allocated to institutions. The discussion pays special attention to the design and use of allocation formula and performance-based funding arrangements, in light of their prominence as a funding innovation.

This chapter presents an analysis of the policy issues related to human resources in higher education. Expenditure on human resources in higher education accounts for about two-thirds of current expenditure by higher education institutions across OECD countries. The quality of institutions’ teaching and learning, research, and engagement with the wider world depends importantly on the skill and ability of the higher education workforce, and the conditions in which they work. The chapter describes the key dimensions for analysis of human resources in higher education. It examines i) policy issues relating to attracting, recruiting and selecting the higher education workforce; ii) the way the work and careers of the higher education workforce is structured; and iii) policies to encourage good performance from the higher education workforce. The discussion focuses on how government policies in these domains aim to steer the practices of higher education institutions and staff; and examines what is known about the impact of these policies on the performance of higher education institutions.

This chapter examines the policies governments use to co-ordinate and shape higher education systems. The size and form of the network of higher education institutions within a given higher education system have a fundamental impact on the way resources can be allocated and deployed. The number of institutions and their location, legal status, size, mission, subject focus and research intensity are all components of the basic landscape of higher education systems, within which higher education policies operate. Sometimes, however, public authorities use policy to reshape the landscape or architecture of higher education. This has most often involved either encouraging the expansion or diversification of higher education provision, or promoting co-operation and concentration of higher education activities to build critical mass, promote excellence or achieve efficiency savings. The chapter examines policies from OECD jurisdictions aimed at achieving both of these broad objectives.