Policy responses to COVID-19 and the efficiency of Italian universities

In response to the COVID-19 pandemic, the Italian government increased financial support to universities. This paper examines the policy effect of increased funding on universities' efficiency in Italy. By focusing on both production and cost-efficiency, we use a panel dataset spanning 7 years (2017-2023) and employ the recently developed Generalized True Random Effect Stochastic Frontier model. Our findings reveal that the post-COVID-19 era is characterized by a statistically significant decline in both production and cost-efficiency, with a more marked decrease observed in cost-efficiency. This result indicates a reversal of the positive efficiency trend observed in Italian universities in the years immediately prior to this period. Moreover, we identify a homogeneous reduction in efficiency across geographic areas, suggesting that the negative effect is unrelated to specific initial conditions or management decisions in the short run.