How do universities affect the regional economic growth? Evidence from Spain

The challenges posed by globalization have led to a rapid increase in the demand for higher education and, at the same time, many countries are earmarking more resources and efforts to foster their population's skills level and knowledge. Nowadays higher education is playing a crucial role in countries' economic development. In fact, higher education is perceived as being sufficient to allow countries to compete in a globalised economy and enhance leadership in knowledge sectors. In the last decades many countries have increased the incentives for and pressures on universities to become more involved in their regions. In response, the universities have developed the so-called Third Mission whereby they collaborate with its milieu in the more direct way. The objective of this paper is to know whether the university presence contributes to encourage the regional economic outcomes. Exploiting the geographic and temporal variation in the foundation of Spanish regional universities after to 1980, we use difference-in-difference approach to estimate its effect on regional economy. The data base includes information for the total Spanish public university system. Our paper contributes to the literature on universities and economic growth, adding more specific data related with university activity. We find little evidence that university presence increases the regional economic growth. We also estimate the effect of the university activity on the creation of knowledge spillover. However, the results vary widely across different regions.