Purpose: Entrepreneurs should invest into new resources and especially to education of the new work force, but as critics formulated by representatives of the free market theory entrepreneurs are not willing to take risks of own resources by anticipating positive externalities that would generate investments with other firms. Governments should take actions of coordinating and planning simultaneous investments, obtaining financial means, investing in infrastructure, protecting new industries and intervening in prequalification of the work force by organizing and financing the schoolsystem and offer appropriate educational programs. Economic and social growth and development are modelled in different ways in practice, with various methods, nevertheless the basic building elements of models are similar, these are the production function, savings function and labour supply function. Methodology/Results: Knowledge spill over stimulates technological improvements of others on basis of one's own innovation and invention activities resulting in collective economic growth. Especially areas with concentration of industry contribute to the efficient growth of knowledge in the new economy. In this model, economic policy has important impact on long-range development: subsidies to education and research & development by encouraging innovations contribute to greater rate of growth. The investment model in higher education that is used in Serbia is based on the formula and it has both qualitative and quantitative characteristics. This paper analyzes the ones relating to the boundary of operational efficiency, expressed as the number of state-financed students. The research methodology is based on the current and the newly created investment model investment in higher education in Serbia, and the available data on the investment of budgetary funds into the faculties of the University of Novi Sad. The data analysis is carried out using mathematical-statistical methods as well as methods of analysis and synthesis. The methodology applied involves the use of methods of analysis and synthesis and the use of statistical and mathematical methods, particularly data envelopment analysis (DEA method), which is the application of linear programming method based on the ranking of countries /regions according to individual indicators analyzed. The study, using the described methodology first, and based on initial data for the given indicators, calculated the DEA indices of the competitiveness of the higher education of 26 countries of the European Union, Serbia, AP Vojvodina. A new investment model in higher education is based on a formula that contains a combination of input-output criteria (the number of first time enrolments and the number of graduates, the proportional cost per student) in the allocation of investment, budgetary resources per student in study programs in higher education. According to the research objectives, the values of the boundary of operational efficiency according to the new and the current investment model in higher education were calculated. The data was reviewed and analyzed in order to determine the performance of the new investment model in higher education through the analyzed indicators. Research limitations/implications: The systems of public investment in higher education in the developed countries of Europe are characterized by a trend toward reorienting investment models that give institutions the freedom in the allocation of resources for instruction and/or research in a manner appropriate for these institutions. A contract based investment model is based on determining the amount of investment in higher education on the basis of a contract, signed by the institution and its founders (usually the government). The advantage of determining the amount of investment through contracts with the founder is the possibility of it affecting the development of the institution based on the assessed needs of the society. The main disadvantage of this model is the fact that the final decision is significantly affected by lobbying or political influence that individual institutions can achieve. In this way, the institution can be in an unfavorable position, based on criteria that are not related to the academic potential of the institution. Originality/Value of paper: The world continues its transition from industrial economy towards information economy. Communities seeking to become most developed should apply the concept of "Knowledge based economic development". In the contemporary world linkages between business, government and academic research can produce technological innovations obtaining long-range economic growth. The economics of higher education is determined by the scope and structure of investment in higher education by the state; on the other hand, the level of public investment is decisively determined by the investment model that is applied in higher education.
