Improved rankings boost university income

League tables ranking higher education institutions are popular, and over the past decade they have gained prominence, as shown by an increase in the number of league tables providers, nationally and internationally.

League tables attempt to summarise the ‘quality’ of an institution or subject into a simple metric in order to help prospective students make informed choices about their educational investment.

But what is the real influence of these league tables on the decisions of applicants?

Using official data on applications to all undergraduate degrees from 2004-11 in the UK, as provided by the Universities and Colleges Admissions Service (UCAS) and the subject-specific Guardian league tables, we found that a one standard deviation change in subject-specific ranking scores was associated with a 4.8% increase in the number of applications received in that subject.

The effect is especially large for the top-performing subjects. Changes in ranking for subjects ranked in the bottom half have no impact on applications. However, reaching the top decile in a subject is associated with an increase in application numbers of up to 15%.

The focus of this research is on ranking within subject level rather than the more often used university wide ranking. This appears to be a more relevant metric as prospective students would want to know about quality in the subject they want to study rather than in the institution in general.

There is surprisingly little difference in the effect of league table scores on applications between subjects, with the exception of business and law degrees for which the effect is almost twice as large.

Student groups

Different groups of students may have different demands for information on quality in higher education.

Indeed, the researchers found that non-UK applicants, probably because they have less knowledge about providers, react the most to changes in league table scores. For them, a one standard deviation improvement in score results in an additional 5.6% increase in applications as compared to home students, where the percentage rise is around 1.7%.

There is no difference by gender on average, but for institutions reaching the top decile, the increase in applications is even stronger for boys.

The final question addressed in this study was whether the demand for information changes with the environment.

Over the period covered by the study, two institutional changes occurred that may have swelled the demand for information: maximum tuition fees were increased from £1,000-£3,000 (US$1,500-US$4,500) a year in 2006; and in 2008, the maximum number of applications per applicant was reduced from six to five.

Indeed, the study reports that the demand for information on quality grew after 2008 as a result of the reduction in the number of choices allowed per student.

Impact on income

Anecdotal evidence suggests that institutions care about their ranking in various league tables. This research suggests that indeed they should, since any drop in the number of applications may have an impact on income.

The authors cannot directly answer this question, as they lack information on the number of registered students. However, they can approximate the income effect by making some assumptions regarding the conversion rate (number of applicants that eventually register) and taking into account the institutional set-up in the UK.

During the period covered by the analysis, the number of home and European Union students was controlled by funding councils (that is, institutions were given a number of students to register) and the only free market was for overseas students (assuming no immigration constraint).

With a conversion rate of 17% of application to enrolment for overseas students, a drop in the ranking score of one standard deviation would lead to an income drop of £13,000 per subject group for a university.

This appears to be pretty small. However, the recruitment rules have recently been eased, at least for the best-performing students. If the recruitment restrictions were to be fully lifted then a drop of one standard deviation in the Guardian league table would translate into an average drop in tuition fees income of about £124,000 in each subject, but the impact would be much greater for top-performing faculties.

Overall, the research concludes that the Guardian leagues tables are used by prospective students to guide their application choice, so changes in league table scores affect the number of application received, especially for the best-performing faculties.

The information provided by the league tables is especially useful for students with the least knowledge of the sector – foreign students – and has become more valuable over time. It is thus likely that league tables are here to stay.

* Arnaud Chevalier is reader in economics and Xiaoxuan Jia is a postgraduate research student in the department of economics at Royal Holloway, University of London.