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The Economic Impact of Colleges and Universities

Author

Listed:
  • John J. Siegfried

    (Department of Economics, Vanderbilt University and AEA)

  • Allen R. Sanderson

    (Department of Economics, University of Chicago)

  • Peter McHenry

    (Department of Economics, Yale University)

Abstract

This essay describes methodological approaches and pitfalls common to studies of the economic impact of colleges and universities. Such studies often claim local benefits that imply annualized rates of return on local investment exceeding 100 percent. We address problems in these studies pertaining to the specification of the counterfactual, the definition of the local area, the identification of "new" expenditures, the tendency to double count economic impacts, the role of local taxes, and the omission of local spillover benefits from enhanced human capital created by higher education, and offer several suggestions for improvement. If these economic impact studies were conducted at the level of accuracy most institutions require of faculty research, their claims of local economic benefits would not be so preposterous, and, as a result, trust in and respect for higher education officials would be enhanced.

Suggested Citation

  • John J. Siegfried & Allen R. Sanderson & Peter McHenry, 2006. "The Economic Impact of Colleges and Universities," Vanderbilt University Department of Economics Working Papers 0612, Vanderbilt University Department of Economics.
    • Handle: RePEc:van:wpaper:0612
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    References listed on IDEAS

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    More about this item

    Keywords

    Colleges; universities; local economic impact; economic impact study;
    All these keywords.

    JEL classification:

    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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