The Economic Impact of Universities: Evidence from Across the Globe

One for the Clever Country culture warriors

The Economic Impact of Universities: Evidence from Across the Globe
by Anna Valero, John Van Reenen – #22501 (ED LS)

Abstract:

We develop a new dataset using UNESCO source materials on the
location of nearly 15,000 universities in about 1,500 regions across
78 countries, some dating back to the 11th Century. We estimate
fixed effects models at the sub-national level between 1950 and 2010
and find that increases in the number of universities are positively
associated with future growth of GDP per capita (and this
relationship is robust to controlling for a host of observables, as
well as unobserved regional trends). Our estimates imply that
doubling the number of universities per capita is associated with 4%
higher future GDP per capita. Furthermore, there appear to be
positive spillover effects from universities to geographically close
neighboring regions. We show that the relationship between growth
and universities is not simply driven by the direct expenditures of
the university, its staff and students. Part of the effect of
universities on growth is mediated through an increased supply of
human capital and greater innovation (although the magnitudes are not
large). We find that within countries, higher historical university
presence is associated with stronger pro-democratic attitudes.

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paul frijters
paul frijters
5 years ago

ah, the GDP growth regression industry is still in full swing, I see! I am actually surprised at how weak the advertised results are: “doubling the number of universities per capita is associated with 4% higher future GDP per capita.”? 4% effect on the level is nothing. Absolutely peanuts in an historical context. France could make everyone a university person and still be nowhere near us! A single outlier could generate that kind of number.

john Walker
5 years ago
Reply to  paul frijters

In medieval to Renaissance Europe you would have found a similar association to the number of cathedrals.

john Walker
john Walker(@johnrwalker)
5 years ago
Reply to  john Walker

On reflection, any cathedral that was worth going on a, pilgrimage to, would surely have lifted GDP by a bit more than %4 !

Jim
Jim
5 years ago

Why do people do these sorts of studies? Why are they funded? And why are they published? I’m not an academic, but surely people reviewing potential journal articles have some form of “relevance” test, or a “nonsense” filter.

I’m thinking about doing a big regression study on the relationship between PokeStops and GDP per capita. Anyone aware of any grant funding available?

George Gell
George Gell
5 years ago

Doubling the number of universities per capita leads to a mere 4% increase in GDP per capita. That is an appallingly low return for the huge expenditure of funds inherent in that doubling. It seems to prove the golden rule : “If you cannot do , teach it”.

singletonengineer
singletonengineer
5 years ago

This type of study is clearly not Jim’s cup of tea. It is, however, directly relevant to the question of the value of universities, more universities, larger universities and the converse.

It cannot stand alone – parallel studies as to the relative value of humanities and STEM faculties are similarly relevant. Are universities which have a large research budget more or less valuable than those with stronger focus on teaching? Is there a correlation between the publishing record of the teaching academics at universities and these universities’ value to their communities, whether measured by GST or happiness index or otherwise? These are neither trivial nor irrelevant considerations.

If, on the other hand, the headline result of the study was that doubling the number of universities resulted in a DECREASE in per capita GDP of 4%, I expect that Jim would have enthusiastically supported the research and demanded immediate action in support of its findings.

Disclosure: I have a couple of university degrees but do not derive income of any kind from a university. I have no skin in this game.

Jim
Jim
5 years ago

singletonengineer

I’m not anti universities. Quite to opposite as there is plenty of evidence that higher learning does add to GDP per capita (albeit at a lower rates of return than a basic education from the research I read years ago).

I just find the implication of the research silly… “Our estimates imply that
doubling the number of universities per capita is associated with 4%
higher future GDP per capita.”
Why are they measuring the number of universities and GDP per capita, rather than the % of the population with a degree and GDP per capita? Wouldn’t that be more sensible? But the sensible measurement has been done hundreds of times and can’t be published, so someone does a regression using a nonsense independent variable….

Moz of Yarramulla
Moz of Yarramulla
5 years ago

Or more accurately, with long-term growth typically between 1% and 2%, you could double the number of universities right now, or wait 2-4 years and get the same growth at no cost. Since universities appear to cost us about 1.5% of GDP to run, even if they were free to build and there were no opportunity costs we’d be paying two years of that growth to double the number of them.

Doing that here seems unlikely to work, anyway. We have significant graduate unemployment/underemployment now. The nasty lesson from the great increase in non-university post-secondary education has hopefully been learned but our governments are apparently incapable of public investment, full stop. So spending a few tens of billions building and endowing new public universities is extremely unlikely (see also: Mal’s destruction of the NBN). I suspect that our government would mostly gain a huge pile of never-to-be-repaid HECS debt out of their inevitable experiment in encouraging private universities.

The study also appears silent on the upper limit to this growth – I suspect a curve rather than a line, especially since it is necessarily asymtotic (at some point the last non-univerity-employed person will be employed by a university, at which point 100% of the country will be both employed by, and enrolled in, university).