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The impact of higher education institutions (HEIs) on the Scottish economy: New evidence from an HEI-disaggregated input

The impact of higher education institutions (HEIs) on the Scottish economy: New evidence from an HEI-disaggregated input-output approach. Kristinn Hermannsson, Katerina Lisenkova, Peter McGregor & J Kim Swales Fraser of Allander Institute and Department of Economics, University of Strathclyde

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The impact of higher education institutions (HEIs) on the Scottish economy: New evidence from an HEI-disaggregated input

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  1. The impact of higher education institutions (HEIs) on the Scottish economy: New evidence from an HEI-disaggregated input-output approach Kristinn Hermannsson, Katerina Lisenkova, Peter McGregor & J Kim Swales Fraser of Allander Institute and Department of Economics, University of Strathclyde Scotland’s universities and the economy: Impact, value and challenges Court senate suite, Colling building, University of Strathclyde, Glasgow Tuesday 30th June 2009

  2. Outline • Background and methods • HEIs as a production sector • Characteristics of HEIs • Total spending impact • Policy simulations

  3. Scottish Input-Output Analysis • Separately identify HEI sector within the 2006 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

  4. Multipliers and assumptions • Multipliers: • Type I: Direct and indirect effects • Type II: Direct, indirect and induced effects (households endogenised) • Assumptions: • Constant returns to scale • Fixed coefficient production technology • Constant coefficients in consumption (Type II multipliers) • No supply constraints • Interpretations: • Long run regional (Supply side has adjusted through changes in factor stocks) • Short run with excess capacity

  5. GVA & employment 2006

  6. Output multipliers

  7. Cost breakdown by sector

  8. Income by sector

  9. Exports & domestic demand

  10. Exports by origin and type

  11. Hypothetical Extraction • Hypothetical extraction of individual Scottish HEIs • Sector is replaced by imports • Expenditure impacts of all students • Debateable what assumptions to make about student spending

  12. Erratum • In paper published in FAI Commentary the GDP impact of Dundee University is said to be £175m but is in fact £196m • Based on this it is claimed the University of Aberdeen is the 4th biggest in Scotland based on GDP impact (£189m), when in fact it is the 5th biggest and Dundee is 4th

  13. Impact of additional £100m on HEIs • Aggregate multiplier effects of £100 million spent on HEIs (in general): output, GDP, employment, output multiplier, employment multiplier • Funded by increased exports • Research • External students • Funded by cutbacks in government expenditure

  14. GDP impactsdisaggregated by sector

  15. Employment impacts disaggregated by sector

  16. Impact of HEIs exports (1) • HEI exports • RUK & ROW research funding • Ex-EU and RUK tuition fees • 25% of Scottish HEIs income is exports • 2006: £ 510 m • Increased by a third from 2002

  17. Impact of HEIs exports (2)

  18. Conclusions & future research • HEIs are a significant sector in terms of their impacts as businesses • The economic characteristics of HEIs are not the same as the public sector • HEIs export effectiveness has immediate and significant repercussions for host economies • Future work and work in progress: • Application to other UK regions • Analysis of interregional impacts • Social accounting matrix (SAM) analyses • Sub regional application: Glasgow

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