Regional economic impact of university research expenditures

Abstract

Governments around the world provide significant funds for research activities at higher education institutions. Despite universities’ increased emphasis on external research funds and increased national funding for university research, little is known about the economic impacts specific to research expenditures. We use IMPLAN, an input-output model, to analyze the local economic impacts of externally sponsored university research expenditures in two geographic areas using a technological university in the Midwestern United States as a case study. For the rural micropolitan area, we find that one million dollars in university external research expenditures is associated with $711,000 in value added, 10 jobs, and$159,000 in tax revenue. The effects per million dollars of expenditures are typically larger in the medium metropolitan area; one million dollars in university external research expenditures is associated with $945,000 in value added, 9 jobs, and$164,000 in tax revenue. We also estimate value added, employment, and tax multipliers of 1.67, 1.86, and 1.74 for the micropolitan area and 2.02, 2.25, and 2.09 in the medium metropolitan area. Last, we show that 15-18% of generated tax revenue goes to the state and 75–77% goes to the federal government. Our results highlight the local and statewide economic returns to national public policy to invest in university research activities and how characteristics of the local economy influence the magnitude of those returns. The variation in the impacts also suggests that policy makers should be aware of differences across both geographic areas and impact measures (e.g. employment versus output)