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

Transcription

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 Sector GVA m GVA % Employment FTE employment % Primary and utilities 4, % 60, % Manufacturing 12, % 230, % Construction 5, % 123, % Distribution and retail 9, % 287, % Hotels, catering, pubs, etc. 3, % 124, % Transport, post and communications 6, % 119, % Banking and financial services 7, % 103, % House letting and real estate services 7, % 27, % Business services 9, % 247, % Public sector 20, % 539, % HEIs 1, % 34, % Other services 3, % 99, % Total 91, % 1,997, %

6 Output multipliers Primary and utilities Manufacturing Construction Distribution and retail Hotels, catering, pubs, etc. Transport, post and communications Banking and financial services House letting and real estate services Business services Public sector HEIs Other services Type I Type II

7 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Cost breakdown by sector Gross operating surplus Compensation of employees Imports Taxes on products and production Intermediate purchases Primary and utilities Manufacturing Construction Distribution and retail Hotels, catering, pubs, etc. Transport, post and communications Banking and financial services House letting and real estate services Business services Public sector HEIs Other services

8 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Income by sector Exports Local final demand Intermediate demand Primary and utilities Manufacturing Construction Distribution and retail Hotels, catering, pubs, etc. Transport, post and communications Banking and financial services House letting and real estate services Business services Public sector HEIs Other services

9 Exports & domestic demand m Edinburgh Glasgow Strathclyde Dundee Aberdeen St Andrews Heriot-Watt Caledonian Stirling Napier Robert Gordon Paisley SAC UHI Abertay QMUC Bell College GSA ECA RSAMD Total exports Domestic demand

10 Exports by origin and type m Edinburgh Glasgow Dundee Strathclyde St Andrews Aberdeen Heriot-Watt Stirling Caledonian Napier Robert Gordon SAC Paisley UHI Abertay QMUC ECA GSA RSAMD Bell College ROW Tuition RUK Tuition ROW Research RUK research

11 Hypothetical Extraction Hypothetical extraction of individual Scottish HEIs HEI spending GDP m 2,404 80% Employment FTE 51,570 85% Sector is replaced by imports Total student spending % 9,196 15% Expenditure impacts of all students Debateable what assumptions to make about student spending SCO RUK ROW Total impact ,007 12% 2% 5% 100% 5,628 1,095 2,472 60,766 9% 2% 4% 100% % 3.3% 3.4%

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 HEI spending GDP m Employment FTE Student impacts HEI Student impacts SCO RUK ROW Total spending SCO RUK ROW Aberdeen , ,293 Abertay ,208 Bell College Dundee , ,741 ECA Edinburgh , ,670 Caledonian , ,673 GSA Glasgow , ,355 Heriot-Watt , ,183 Napier , ,889 Paisley , ,179 QMUC ,059 Robert Gordon , ,767 RSAMD St Andrews , ,589 SAC , ,349 Stirling , ,964 Strathclyde , ,297 UHI ,205 Total impact 2, ,029 57,071 6,556 1,276 2,880 67,783 % of SCO total 2.7% 0.4% 0.1% 0.2% 3.3% 2.9% 0.3% 0.1% 0.1% 3.4% GDP/employment Total

14 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

15 GDP impacts disaggregated by sector Total impact Other services HEIs Public sector Business services House letting and real estate services Banking and financial services Transport, post and communications Hotels, catering, pubs, etc. Distribution and retail Construction Funding from Scottish Government Increased exports Manufacturing Primary and utilities

16 Employment impacts disaggregated by sector Total impact Other services HEIs Public sector Business services House letting and real estate services Banking and financial services Transport, post and communications Hotels, catering, pubs, etc. Distribution and retail Construction Funding from Scottish Government Increased exports Manufacturing Primary and utilities -2,000-1,500-1, ,000 1,500 2,000 2,500 3,000 3,500

17 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

18 Impact of HEIs exports (2) Exports ( m) GDP impact ( m) Employment impact FTE s , % 0.67% 0.72%

19 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