The Economic Development Impacts of Universities on Regions: Do Size and Distance Matter?

As American colleges and universities have increasingly become involved in economic development since the mid-1980s, there has been a concomitant growth of interest in measuring the impacts of higher education on regional economies. This study examines the influences of 4-year colleges and universities in the United States at the metropolitan level, focusing on the internal and external factors that affect the generation of regional economic development impacts, the spatial extent of the impacts, and separating the effects of different university functions. Knowledge-based university activities, particularly teaching and basic research, are found to have substantial positive effects on regional earnings gains.

Three of the four measures of university activity are statistically significant in explaining metropolitan statistical area variation in the change in average earnings. Research and development expenditures are strongly related to increases in regional average earnings, but the scale of the effect is relatively small. For example, in the “average” region, an additional $10 million in annual university research expenditures represents a 37% increase in funding but raises the earnings index by only 0.23 over 15 years. In contrast, the median change in the earnings index across the 313 study regions from 1986 to 2001 was –4.51. The coefficient of the count of science degrees is negative, but higher percentages of graduate science degrees among all degrees awarded are associated with increases in the regional index of average earnings. Together, this suggests that producing too many degrees at all levels reduces relative earnings, perhaps by enlarging the qualified workforce and flooding the labor market. Given a particular number of graduates, however, concentrating available educational resources in science and technology fields and at the graduate level is advantageous for regional development. University patenting activity does not yield a significant effect. The conclusion to be drawn from the model is that traditional outputs of knowledge and human capital are the primary means by which institutions of higher education effect economic development outcomes.

The greatest impacts occur in small- and medium-sized regions, suggesting that universities may be able to act as a substitute for agglomeration economies. Spatial spillovers across regions are influential as well, indicating a relatively flat spatial gradient of university impacts that stretches to neighboring regions.

Further information can be found in:

Goldstein, H. and Drucker, J. 2006. The Economic Development Impacts of Universities on Regions: Do Size and Distance Matter? Economic Development Quarterly 20 (1): 22-43.

Contact

Prof. Harvey Goldstein, MODUL University Vienna, Department of Public Governance and Management, Am Kahlenberg 1, 1190 Vienna, Austria
harvey.goldstein@modul.ac.at | www.modul.ac.at