Higher education policy: Why hope for quality when rewarding quantity?

Abstract This paper analyses the impact of the Excellence Initiative (EI) in Germany, a policy intervention aimed to promote and select outstanding active research universities by competitively allocating additional public funds. Academic debate on efficiency and effectiveness of higher education policy does not addresses issues such as treatment and selection effects, suffers from generalizable measurement problems, and does not take a comparative approach. Our objective is to fill this gap by adopting Italy as a control country. In doing so, this paper examines (1) whether this policy approach is suitable to stimulate the system and the awarded institutions, (2) how the performance impact can be measured and (3) whether the results are driven by country specific effects or are generalizable. To this end, we applied a triple difference-in-differences analysis (DDD) on a dataset of 72 German and 51 Italian state universities during the first round of the EI, from 2004 to 2013. We found that the EI has had a positive effect on research quantity, but a reverse effect on research quality.