The Economic Impact of Colleges and Universities
Working Paper No. 06-W12
John J. Siegfried, Allen R. Sanderson, and Peter McHenry
ABSTRACT [article]
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.
Keywords and Phrases: Colleges, universities, local economic impact, economic impact study
JEL Classification Number: I23, R11