Year of Publication



Martin School of Public Policy and Administration

Date Available


Executive Summary

In 2008, the Korean government launched a funding project that used formulas to select which four-year universities received funding from the government. The aim of the project was to improve university performance and educational quality, particularly with respect to undergraduate student outcome. However, there were few empirical studies on the project's actual impact. This study is an examination of three effects of the project. First, I analyze whether the project itself, regardless of funding, can bring about change in five formula indicators of all universities: employment rate, enrollment rate, full-time faculty rate, educational expenses per student, and scholarship rate. Second, in order to examine the effect of funding, I investigate the changes in the five formula indicators between funded universities and non-funded universities. Third, I examine whether the project caused competition among universities and how universities responded to government policy.

Recent studies in the U.S. have not provided empirical evidence that formula funding has increased the quality of universities, and many of these studies pointed out that the small percentage of funds tied to the achievement of these formulas may not be enough incentive for universities to make institutional changes. Observations used in this study are 149 of the 201 public and private four-year universities in Korea. The dependent variables for this study are the five formula indicators.

The results of regression analysis show that formula funding in Korea was an effective policy to improve some performance and educational indicators from 2008 to 2011. However, the study also shows that the change in formula indicators of funded universities is lower compared to that of non-funded universities. Therefore, the results suggest that improving the performance of funded universities is a most urgent task.