Estimating the economic impact of a college or university on a nonlocal economy
Johnson, Troy M.
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Higher education institutions frequently use economic impact studies to demonstrate the short-term contributions colleges and universities make to business volume and employment in local economies. Impact methods are confined to estimating impact on an economy within which the institution is located—a local economy. However, a higher education institution also may have a substantial impact on an economy outside which the institution is located—a nonlocal economy. In this study, methods previously limited to the estimation of local impact are expanded to facilitate the estimation of impact on a nonlocal economy. Expenditure models typically used in local impact analysis are used as a theoretical foundation for describing nonlocal impact estimation. Traditional impact sources including the institution, faculty/staff, students and visitors are used to estimate direct, indirect (multiplier effect) and total impact on business volume and employment. In addition to expanding existing methodology, two impact studies are conducted to describe the difference between local and nonlocal impact methods. The methods are compared after conducting a local impact study of South Plains College, Levelland (SPC) on Hockley County and a simultaneous nonlocal impact study of SPC on Lubbock County. The difference in methodology between local and nonlocal estimations is most substantial in the data gathering process, particularly in sorting expenditures. It is shown that nonlocal studies should not include part-time student expenditures and that surveys are useful for determining the expenditure patterns of faculty/staff and students. The impact studies show that SPC has direct business volume impacts of $13 million and $11 million on the local and nonlocal economies, respectively. Indirect impact is about $7 million on the local economy and $10 million on the nonlocal economy. SPC contributes about $21 million in total business volume to each economy. Direct full-time employment impact is 255 jobs and on the local economy and 54 jobs on the nonlocal economy. Indirectly, 562 jobs are created in the local economy and 446 in the nonlocal economy. Total employment impact is 817 jobs on the local economy and 500 jobs on the nonlocal economy.