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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

  • 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)

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.

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Paper provided by University of Strathclyde Business School, Department of Economics in its series Working Papers with number 1204.

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Length: 47 pages
Date of creation: Jun 2012
Publication status: Published
Handle: RePEc:str:wpaper:1204
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  1. Heckman, James J., 2006. "Contributions of Zvi Griliches," IZA Discussion Papers 2184, Institute for the Study of Labor (IZA).
  2. Enrico Moretti, 2002. "Estimating the Social Return to Higher Education: Evidence From Longitudinal and Repeated Cross-Sectional Data," NBER Working Papers 9108, National Bureau of Economic Research, Inc.
  3. Richard Harris & Qian Cher Li & John, 2010. "The Impact of Higher Education Institution-Firm Knowledge Links on Firm-level Productivity in Britain," Working Papers 1017, University of Strathclyde Business School, Department of Economics.
  4. Michael Grossman, 2005. "Education and Nonmarket Outcomes," NBER Working Papers 11582, National Bureau of Economic Research, Inc.
  5. Lange, Fabian & Topel, Robert, 2006. "The Social Value of Education and Human Capital," Handbook of the Economics of Education, Elsevier.
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