48th Congress of the European Regional Science Association Liverpool, England, August 27-31, 2008

1. The Economic Impacts of Higher Education Institutions on Scotland: An Input-Output AnalysisK. Hermannsson, P. McGregor, N. Pappas and K. SwalesFraser of Allander Institute, Department of Economics, University of Strathclydeand CPPR 48th Congress of the European Regional Science Association Liverpool, England, August 27-31, 2008

2. Outline • Background • Augmentations of the Scottish IO tables • Simulation approach • Simulation results • Future work

3. Background • Part of an ESRC initiative with additional support from the Funding Councils • Our project: • Model the impacts of HEIs at a regional and national level • Use multi-sectoral regional and inter-regional models • I-O, SAM and CGE

4. Scottish Input-Output Analysis • Separately identify HEI sector from 2004 Scottish IO accounts : • Instructive as a set of accounts • Basis for all other multi-sectoral modelling • Perform conventional demand-driven analysis • Disaggregate the Scottish IO sector into the component institutions.

5. HEI inputs: disaggregating the column • Gross output • Purchases of all inputs • Domestic intermediate • Imports • Taxes • Wages • Other value added (rents and profits)

6. Overview of Scottish HEIs (1)

7. Overview of Scottish HEIs (2)

8. Log Income

9. HEI outputs: disaggregating the row • Value of sales: • domestic intermediate demand • household consumption • NPISH • RUK exports • ROW exports • (investment, stocks, government)

10. Income and exports

11. Income and exports (2)

12. Income by source (1)

13. Income by source (2)

14. Student expenditure • Demand category: • Household expenditure (domestic students) • Tourism expenditure? (RUK and ROW students) • Information: • Total, RUK and ROW students • UK data on size and distribution of purchases • IO household consumption data for imports

15. Demand driven analysis

16. Demand driven analysis • Assumptions of demand driven IO • No supply constraints • No price effects • Linear homogenous production and demand functions

17. Hypothetical Extraction • Hypothetical extraction of individual Scottish HEIs. • Sector is replaced by imports • Expenditure impacts of RUK and ROW students. • These students lost to Scotland

18. GDP of Scottish HEIs

19. GDP of Scottish HEIs

20. Multiplier impacts • Aggregate multiplier effects of £100 million spent on HEIs (in general): output, GDP, employment, output multiplier, employment multiplier • Without offsetting reduction in government expenditure • With offsetting reduction.

21. Impacts disaggregated by sector (1)

22. Impacts disaggregated by sector (2)

23. Impact of HEIs external income (1) • 26% of HEIs income external to Scotland • RUK & ROW research funding • Ex-EU tuition fees • 2002: £ 399 m • 2006: £ 533 m • ↑ 34%

24. Impact of HEIs external income (2)

25. Impact of HEIs external income (3)

26. Future work • Better disaggregation of the row (Scottish Government) • Better information on student consumption • More detailed work on intermediate inputs