The causal impact of performance-based funding on university performance: quasi-experimental evidence from a policy in Russian higher education

In most countries implementing structural transformations in their higher education systems, a key goal of policymakers is to tie the amount of public funding to university performance. The present article analyses the Russian performance-based funding (PBF) reform to provide a quasi-experimental assessment of its effects on university performance. To evaluate the causal effect of PBF on university performance, we define the treatment and control groups by distinguishing universities on the basis of changes in their performance-based allocations and estimate the causal effect of the redistribution of public funds between universities as a result of PBF. Results indicate that the performance of universities is indeed affected by the extra funding generated by the reform, although heterogeneity is also at play. In the short term, the new policy has had an impact on the average national exam scores of enrollees showing that it has had encouraged universities to be more selective.