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
Outline Background and methods HEIs as a production sector Characteristics of HEIs Total spending impact Policy simulations
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
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
GVA & employment 2006 Sector GVA m GVA % Employment FTE employment % Primary and utilities 4,295 4.7% 60,593 3.0% Manufacturing 12,594 13.8% 230,001 11.5% Construction 5,731 6.3% 123,655 6.2% Distribution and retail 9,797 10.7% 287,612 14.4% Hotels, catering, pubs, etc. 3,146 3.4% 124,603 6.2% Transport, post and communications 6,341 6.9% 119,718 6.0% Banking and financial services 7,312 8.0% 103,133 5.2% House letting and real estate services 7,699 8.4% 27,346 1.4% Business services 9,291 10.2% 247,176 12.4% Public sector 20,046 21.9% 539,924 27.0% HEIs 1,276 1.4% 34,011 1.7% Other services 3,953 4.3% 99,614 5.0% Total 91,482 100% 1,997,386 100%
3.5 3 2.5 2 1.5 1 0.5 0 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
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
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
450 400 350 300 250 200 150 100 50 0 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
160 140 120 100 80 60 40 20 0 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
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 603 20% 9,196 15% Expenditure impacts of all students Debateable what assumptions to make about student spending SCO RUK ROW Total impact 369 72 162 3,007 12% 2% 5% 100% 5,628 1,095 2,472 60,766 9% 2% 4% 100% % 3.3% 3.4%
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
HEI spending GDP m Employment FTE Student impacts HEI Student impacts SCO RUK ROW Total spending SCO RUK ROW Aberdeen 189 24.97 5.18 11.53 230 4,553 443 92 205 5,293 Abertay 38 8.90 1.13 3.97 52 960 158 20 71 1,208 Bell College 25 10.42 0.07 0.07 36 667 185 1 1 855 Dundee 196 31.04 6.70 10.90 245 4,878 551 119 193 5,741 ECA 18 2.62 1.48 2.22 24 436 47 26 39 549 Edinburgh 498 33.50 21.58 23.56 577 11,274 595 383 418 12,670 Caledonian 119 41.81 2.69 5.64 169 2,783 742 48 100 3,673 GSA 19 2.53 1.47 1.78 25 495 45 26 32 597 Glasgow 375 48.31 7.34 12.81 443 8,140 858 130 227 9,355 Heriot-Watt 116 4.79 2.42 24.25 147 2,625 85 43 431 3,183 Napier 96 21.16 2.28 13.17 133 2,239 376 40 234 2,889 Paisley 69 23.42 0.49 3.46 97 1,693 416 9 61 2,179 QMUC 33 9.62 1.78 3.54 48 794 171 32 63 1,059 Robert Gordon 89 23.05 2.08 10.05 124 2,143 409 37 178 2,767 RSAMD 12 1.48 0.52 0.51 15 316 26 9 9 361 St Andrews 129 8.05 8.67 11.93 158 3,081 143 154 212 3,589 SAC 51 2.11 0.16 0.15 54 1,305 38 3 3 1,349 Stirling 99 17.43 3.21 5.83 125 2,494 309 57 103 2,964 Strathclyde 225 41.86 2.34 16.29 285 5,223 743 42 289 6,297 UHI 28 12.24 0.29 0.56 41 973 217 5 10 1,205 Total impact 2,425 369 72 162 3,029 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
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
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 -80-60 -40-20 0 20 40 60 80 100 120 140
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 -2,000-1,500-1,000-500 0 500 1,000 1,500 2,000 2,500 3,000 3,500
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
Impact of HEIs exports (2) Exports ( m) GDP impact ( m) Employment impact FTE s 510 611 14,370 1.0% 0.67% 0.72%
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