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Do Universities Generate Agglomeration Spillovers? Evidence from Endowment Value Shocks

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  • Shawn Kantor
  • Alexander Whalley

Abstract

In this paper we quantify the extent and magnitude of agglomeration spillovers from a formal institution whose sole mission is the creation and dissemination of knowledge -- the research university. We use the fact that universities follow a fixed endowment spending policy based on the market value of their endowments to identify the causal effect of the density of university activity on labor income in the non-education sector in large urban counties. Our instrument for university expenditures is based on the interaction between each university's initial endowment level at the start of the study period and the variation in stock market shocks over the course of the study period. We find modest but statistically significant spillover effects of university activity. The estimates indicate that a 10% increase in higher education spending increases local non-education sector labor income by about 0.5%. As the implied elasticity is no larger than what previous work finds for agglomeration spillovers arising from local economic activity in general, university activity does not appear to make a place any more productive than other forms of economic activity. We do find, however, that the magnitude of the spillover is significantly larger for firms that are technologically closer to universities in terms of citing patents generated by universities in their own patents and sharing a labor market with higher education.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15299.

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Date of creation: Aug 2009
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Publication status: published as “ Do Universities Generate Agglomeration Spillovers? Evidence from Endowment Value Shocks ,” T IAA - CREF Institute Research Dialogue #96 (February 2010)
Handle: RePEc:nbr:nberwo:15299

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  1. Do Universities Generate Agglomeration Spillovers?
    by Kevin Denny in Geary Behaviour Centre on 2009-09-02 07:13:00
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Cited by:
  1. Christian Helmers & Mark Rogers, 2010. "The impact of university research on corporate patenting," LSE Research Online Documents on Economics 33549, London School of Economics and Political Science, LSE Library.
  2. Naomi Hausman, 2012. "University Innovation, Local Economic Growth, and Entrepreneurship," Working Papers 12-10, Center for Economic Studies, U.S. Census Bureau.
  3. Megha Mukim, 2011. "Does agglomeration boost innovation? An econometric evaluation," ERSA conference papers ersa10p1356, European Regional Science Association.
  4. Christian Helmers & Henry Overman, 2013. "My Precious! The Location and Diffusion of Scientific Research: Evidence from the Synchrotron Diamond Light Source," SERC Discussion Papers 0131, Spatial Economics Research Centre, LSE.

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