Higher Education Economic Impact Studies: Accurate Measures Of Economic Impact?

Abstract

Many public institutions of higher education conduct/contract economic impact studies regularly.  The accuracy of the economic impact is frequently suspect, since institutions frequently use economic impact as a means to demonstrate their contribution to the local economy in order to justify and increase tax dollars received. Economic impact studies are also used as marketing tools promoting the value of the service being provided to the local community.  Hence, the question arises, is it possible for higher education economic impact studies to accurately reflect the dollar value contributed to the economy?  Or particularly in the era of tightening budgets due to shrinking state tax revenue, will these types of studies be overstated in order to justify tax dollars received?  As Beck and Elliot (1995) have stated, a major criticism of in-house studies is the overstatement of the dollar impact by the institution.

Consequently, the strength and credibility of the study may lie in the methodology used to conduct impact studies.   With sound methodology, the results may become less suspect.  However, there are a variety of differing methodologies used, from the very complicated involving input-output analysis and econometric modeling to the streamlined which involve calculating expenditures and the use of economic multipliers.   This paper discusses methodology issues surrounding economic impact studies in higher education.  The issues of the long-run versus short-run approach, geographic versus service area, calculation of expenditures, choice of economic multipliers and the labor multiplier, etc., will be discussed. 

The impact study conducted by the author will be used as a case study to demonstrate methodology used in a recent economic impact study and to discuss the importance of methodology in the area of college/university impact studies.