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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

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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


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Outline Scottish economy: New evidence from an HEI-disaggregated input-output approach

  • Background and methods

  • HEIs as a production sector

  • Characteristics of HEIs

  • Total spending impact

  • Policy simulations


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Scottish Input-Output Analysis Scottish economy: New evidence from an HEI-disaggregated input-output approach

  • 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


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Multipliers and assumptions Scottish economy: New evidence from an HEI-disaggregated input-output approach

  • 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


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GVA & employment 2006 Scottish economy: New evidence from an HEI-disaggregated input-output approach


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Output multipliers Scottish economy: New evidence from an HEI-disaggregated input-output approach


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Cost breakdown by sector Scottish economy: New evidence from an HEI-disaggregated input-output approach


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Income by sector Scottish economy: New evidence from an HEI-disaggregated input-output approach


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Exports & domestic demand Scottish economy: New evidence from an HEI-disaggregated input-output approach


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Exports by origin and type Scottish economy: New evidence from an HEI-disaggregated input-output approach


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Hypothetical Extraction Scottish economy: New evidence from an HEI-disaggregated input-output approach

  • Hypothetical extraction of individual Scottish HEIs

    • Sector is replaced by imports

  • Expenditure impacts of all students

    • Debateable what assumptions to make about student spending


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Erratum Scottish economy: New evidence from an HEI-disaggregated input-output approach

  • 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


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Impact of additional £100m on HEIs Scottish economy: New evidence from an HEI-disaggregated input-output approach

  • 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


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GDP impacts Scottish economy: New evidence from an HEI-disaggregated input-output approachdisaggregated by sector


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Employment Scottish economy: New evidence from an HEI-disaggregated input-output approachimpacts disaggregated by sector


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Impact of HEIs exports (1) Scottish economy: New evidence from an HEI-disaggregated input-output approach

  • 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


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Impact of HEIs exports (2) Scottish economy: New evidence from an HEI-disaggregated input-output approach


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Conclusions & future research Scottish economy: New evidence from an HEI-disaggregated input-output approach

  • 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


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