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The economic impact of colleges and universities

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  • Siegfried, John J.
  • Sanderson, Allen R.
  • McHenry, Peter

Abstract

This essay describes methodological approaches and pitfalls common to studies of the economic impact of colleges and universities. Such studies often claim local benefits that imply annualized rates of return on local investment exceeding 100 percent. We address problems in these studies pertaining to the specification of the counterfactual, the definition of the local area, the identification of "new" expenditures, the tendency to double count economic impacts, the role of local taxes, and the omission of local spillover benefits from enhanced human capital created by higher education, and offer several suggestions for improvement. If these economic impact studies were conducted at the level of accuracy most institutions require of faculty research, their claims of local economic benefits would not be so preposterous, and, as a result, trust in and respect for higher education officials would be enhanced.
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Suggested Citation

  • Siegfried, John J. & Sanderson, Allen R. & McHenry, Peter, 2007. "The economic impact of colleges and universities," Economics of Education Review, Elsevier, vol. 26(5), pages 546-558, October.
    • Handle: RePEc:eee:ecoedu:v:26:y:2007:i:5:p:546-558
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    More about this item

    JEL classification:

    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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