Why reform Europe’s universities?

Recently published international rankings indicate that the performance gap between European and American universities is large and, in particular, that the best European universities lag far behind the best American
universities. The country performance index we construct using the Shanghai ranking confirms that, despite the good performance of some countries, Europe as a whole trails the US by a wide margin. The reason for this situation,
which contributes to Europe’s lagging growth performance, is two-fold. First,
Europe invests too little in higher education. Total public and private spending on higher education in EU25 accounts for barely 1.3% of GDP, against 3.3% in
the US. This translates into average spending of less than €10,000 per student in EU25 versus more than €35,000 in the US. Second, European universities suffer from poor governance, insufficient autonomy and often perverse
incentives. Our own survey of European universities shows that both factors contribute to the EU’s poor performance and that reform should take place on both fronts, because autonomy also increases the efficiency of spending.