The economic impact of colleges and universities

Abstract

This essay describes methodological approaches and pitfalls common to studies of the economic impact of colleges and universities. Such studies often claim local benefits that imply annualized rates of return on local investment exceeding 100 percent. We address problems in these studies pertaining to the specification of the counterfactual, the definition of the local area, the identification of "new" expenditures, the tendency to double count economic impacts, the role of local taxes, and the omission of local spillover benefits from enhanced human capital created by higher education, and offer several suggestions for improvement. If these economic impact studies were conducted at the level of accuracy most institutions require of faculty research, their claims of local economic benefits would not be so preposterous, and, as a result, trust in and respect for higher education officials would be enhanced. 1 The authors gratefully acknowledge financial support from the Andrew W. Mellon Foundation. Malcolm Getz, Paula Stephan and two anonymous referees provided useful comments on an earlier draft. Morgan Wiener suggested the topic to us. She wrote an undergraduate honors thesis (Wiener, 2003

The impact of polytechnic institutes on the local economy

“…For example, Ryan & Malgieri (1992) consider that this value depends on the size of the region under analysis. In fact, an ever-controversial topic in economic impact analysis is the definition of an appropriate geographic area to be considered in the study (Siegfried et al, 2007). The main reason is that, depending on how geographic area is defined, specific economic effects will be felt within and outside the region (Elliott et al, 1988), thus determining the multiplier value to use.…”

“…The assessment of the regional impact followed two approaches. One of the approaches is based on the estimation of the economic impact (Drucker & Goldstein, 2007;Siegfried et al, 2007) reflected, for instance, in increased economic activity, increased number of jobs and income levels (Yserte & Rivera, 2010), in the higher qualification of active population and in workers' productivity (Becker, 1993;Bluestone, 1993), or in R&D activities and technology transfer (Rephann et al, 2009). …”

The Economic Impact of Higher Education Institutions in Ireland: Evidence from Disaggregated Input Output Tables.

“…In the context of evaluation of the economic impact of higher education institutions a comprehensive review of some of the methodological and interpretational challenges can be found in Siegfried et al (2007). More recent discussions include McHenry, Sanderson, and Siegfried (2012), Garrido---Yserte and Gallo---Rivera (2009), Pastor, Pérez, and Fernández de Guevara (2013), which papers all in effect urge caution on over grandiose claims for impact.…”

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“…taking account of (and measuring through experimental or quasi-experimental research) the counterfactual, the state of affairs that would have pertained if the intervention had not been made. Instead, the more general use common in policy and debates on higher education is more akin to 'outcome' (Siegfried et al, 2007). Oancea (2013b) highlights tensions between the counterfactual causation underpinning performance-based accountability and context-sensitive fluid notions of impact.…”