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The system-wide impacts of the external benefits to higher education on the Scottish economy: An exploratory “micro-to-macro" approach

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  • Kristinn Hermannsson

    () (Fraser of Allander Institute, Department of Economics, University of Strathclyde)

  • Katerina Lisenkova

    () (Fraser of Allander Institute, Department of Economics, University of Strathclyde)

  • Patrizio Lecca

    () (Fraser of Allander Institute, Department of Economics, University of Strathclyde)

  • Peter McGregor

    () (Fraser of Allander Institute, Department of Economics, University of Strathclyde)

  • Kim Swales

    () (Fraser of Allander Institute, Department of Economics, University of Strathclyde)

Abstract

The private market benefits of education, i.e. the wage premia of graduates, are widely studied at the micro level, although the magnitude of their macroeconomic impact is disputed. However, there are additional benefits of education, which are less well understood but could potentially drive significant macroeconomic impacts. Following the taxonomy of McMahon (2009) we identify four different types of benefits of education. These are: private market benefits (wage premia); private non market benefits (own health, happiness, etc.); external market benefits (productivity spillovers; and external non-market benefits (crime rates, civic society, democratisation, etc.). Drawing on available microeconometric evidence we use a micro-to-macro simulation approach (Hermannsson et al, 2010) to estimate the macroeconomic impacts of external benefits of higher education. We explore four cases: technology spillovers from HEIs; productivity spillovers from more skilled workers in the labour market; reduction in property crime; and the potential overall impact of external and private non-market benefits. Our results suggest that the external economic benefits of higher education could potentially be very large. However, given the dearth of microeconomic evidence this result should be seen as tentative. Our aim is to illustrate the links from education to the wider economy in principle and encourage further research in the field.

Suggested Citation

  • Kristinn Hermannsson & Katerina Lisenkova & Patrizio Lecca & Peter McGregor & Kim Swales, 2012. "The system-wide impacts of the external benefits to higher education on the Scottish economy: An exploratory “micro-to-macro" approach," Working Papers 1204, University of Strathclyde Business School, Department of Economics.
  • Handle: RePEc:str:wpaper:1204
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    References listed on IDEAS

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    1. Moretti, Enrico, 2004. "Estimating the social return to higher education: evidence from longitudinal and repeated cross-sectional data," Journal of Econometrics, Elsevier, vol. 121(1-2), pages 175-212.
    2. Grossman, Michael, 2006. "Education and Nonmarket Outcomes," Handbook of the Economics of Education, Elsevier.
    3. James Heckman, 2010. "Contributions of Zvi Griliches," NBER Chapters,in: Contributions in Memory of Zvi Griliches, pages 5-22 National Bureau of Economic Research, Inc.
    4. Lange, Fabian & Topel, Robert, 2006. "The Social Value of Education and Human Capital," Handbook of the Economics of Education, Elsevier.
    5. R. Harris & Q. C. Li & J. Moffat, 2011. "The impact of higher education institution-firm knowledge links on firm-level productivity in Britain," Applied Economics Letters, Taylor & Francis Journals, vol. 18(13), pages 1243-1246.
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    Cited by:

    1. Kristinn Hermannsson & Katerina Lisenkova & Patrizio Lecca & Peter McGregor & Kim Swales, 2010. "The Importance of Graduates for the Scottish Economy: A "Micro-to-Macro" Approach," Working Papers 1026, University of Strathclyde Business School, Department of Economics.

    More about this item

    Keywords

    Supply side impact; higher education institutions; computable general equilibrium model; Social and external benefits; Crime;

    JEL classification:

    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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