Does university performance have an economic payoff for their home regions? Evidence for the Spanish provinces

This paper analyzes the impact of the university system performance on labor productivity growth for Spanish regions during the period 2009–2016. Using a frontier approach, we decompose changes in university performance into efficiency changes (approximations to the frontier) and changes due to technical progress (shifts of the frontier). Our results show a positive link between university performance and the productivity growth of their home regions. We also find that this impact is driven by shifts in the frontier rather than by approximation to the frontier. This effect is robust across stages of the economic cycle (crisis and recovery), as well as across different estimation methods, and when including spatial spillovers, although it is only significant for provinces with productivity levels above the median. This suggests that the inefficiency of the Spanish university system can be one of the factors slowing down the convergence path of Spanish provinces.