The Economic Impacts of Higher Education Institutions on Scotland: An Input-Output Analysis

K. Hermannsson, P. McGregor, N. Pappas and K. SwalesFraser of Allander Institute,

Department of Economics, University of Strathclydeand CPPR

48th Congress of the European Regional Science Association

Liverpool, England, August 27-31, 2008

Outline

• Background

• Augmentations of the Scottish IO tables

• Simulation approach

• Simulation results

• Future work

Background

• Part of an ESRC initiative with additional support from the Funding Councils

• Our project:– Model the impacts of HEIs at a regional and

national level– Use multi-sectoral regional and inter-regional

models– I-O, SAM and CGE

Scottish Input-Output Analysis

• Separately identify HEI sector from 2004 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.

HEI inputs: disaggregating the column

• Gross output• Purchases of all inputs

– Domestic intermediate– Imports– Taxes – Wages – Other value added (rents and profits)

Overview of Scottish HEIs (1)Total Income (£ m)

Wages (£m)

Student numbers

Staff numbers

Wages/ expenditure

Output per staff (£)

Output per student (£)

Edinburgh 436 239 23,715 6,100 56%71,40

5 18,367

The University of Glasgow 312 193 23,590 4,820 62%64,80

7 13,242

Strathclyde 191 113 25,105 2,973 61%64,27

4 7,610

Dundee 164 101 18,610 2,810 60%58,35

3 8,811

Aberdeen 157 98 13,760 2,570 61%61,08

3 11,409

St Andrews 109 65 8,645 1,888 61%57,62

2 12,581

Heriot-Watt University 100 57 10,225 1,465 58%67,94

9 9,735

Caledonian 98 63 17,045 1,613 65%60,55

4 5,729

Stirling 84 50 8,940 1,683 61%49,72

5 9,358

Napier University 81 49 14,850 1,368 67%59,48

9 5,478

Totals for the year 2005/2006 Source: HESA

Overview of Scottish HEIs (2)Total Inco

me (£ m)

Wages

(£m)

Student

numbers

Staff numbe

rs

Wages/ expenditu

re

Output per staff (£)

Output per

student (£)

The RG University 75 45 12,790 1,295 59% 57,980 5,871

The University of Paisley 58 35 13,040 995 62% 58,775 4,485

Scottish Agricultural College 44 26 770 848 59% 51,515 56,700

UHI Millennium Institute 35 3 6,600 90 10%392,94

4 5,358

Abertay 32 19 4,125 550 59% 59,009 7,868

QMUC, Edinburgh 28 17 5,410 430 64% 64,116 5,096

Bell College 20 14 4,720 423 71% 47,157 4,221

Glasgow School of Art 16 10 1,555 255 64% 61,957 10,160

Edinburgh College of Art 15 10 1,705 263 66% 56,027 8,626

The RSAMD 10 6 680 145 63% 71,572 15,262

Totals for the year 2005/2006 Source: HESA

Log Income

HEI outputs: disaggregating the row

• Value of sales:– domestic intermediate demand– household consumption– NPISH– RUK exports– ROW exports– (investment, stocks, government)

Income and exports

Income by sourceExports / output

Funding Council grants

Research

grants

Tuition fees

& education

grantsOther

income

Endowment &

investment income

RUK expor

tsROW

Exports

Aberdeen 40% 28% 17% 13% 1% 12% 22%

Abertay 56% 4% 20% 18% 1% 4% 20%

Bell College 50% 1% 39% 11% 0% 1% 10%

Dundee 37% 26% 20% 17% 0% 12% 19%

Edinburgh College of Art 60% 3% 26% 10% 2% 1% 21%

Edinburgh University 34% 26% 15% 22% 3% 14% 24%

Caledonian University 54% 4% 24% 18% 0% 4% 18%

Glasgow School of Art 63% 4% 23% 9% 1% 2% 18%

Glasgow University 42% 24% 17% 15% 2% 13% 18%

Heriot-Watt University 36% 15% 29% 20% 1% 8% 30%

Totals for the year 2005/2006 Source: HESA

Income and exports (2)

Income by sourceExports / output

Funding Council grants

Research

grants

Tuition fees

& education

grantsOther

income

Endowment &

investment income

RUK expor

tsROW

Exports

Napier University 50% 3% 33% 14% 1% 3% 20%

The University of Paisley 55% 3% 30% 11% 1% 2% 15%

QMUC, Edinburgh 49% 11% 27% 11% 1% 6% 18%

The RG University 42% 4% 36% 15% 3% 4% 23%

The RSAMD 59% 1% 22% 14% 4% 1% 19%

St Andrews University 32% 26% 23% 18% 2% 13% 31%

Scottish Agricultural College 45% 17% 5% 32% 0% 9% 28%

The University of Stirling 38% 11% 24% 26% 1% 7% 27%

The University of Strathclyde 45% 15% 27% 11% 2% 8% 19%

UHI Millennium Institute 57% 22% 12% 9% 0% 12% 7%

Totals for the year 2005/2006 Source: HESA

Income by source (1)

£ m, %Scottish Government

External Income

Operational Income Total

Edinburgh 181 42% 143 33% 111 26% 436

Glasgow 163 52% 93 30% 57 18% 312

Strathclyde 112 59% 46 24% 34 18% 191

Dundee 84 51% 51 31% 29 18% 164

Aberdeen 79 50% 54 35% 24 15% 157

St Andrews 43 40% 42 39% 23 21% 109

Heriott Watt 51 51% 27 27% 22 22% 100

Caledonian 72 74% 8 8% 17 18% 98

Stirling 46 55% 14 17% 24 28% 84

Napier 59 73% 10 12% 13 15% 81

Income by source (2)

£ m, %Scottish Government External Income

Operational Income Total

Robert Gordon 49 65% 12 15% 15 19% 75

Paisley 47 80% 4 7% 8 13% 58

Scot Agr College 21 48% 8 17% 15 35% 44

UHI 24 68% 8 22% 3 10% 35

Abertay 22 69% 4 11% 6 20% 32

Queen Margaret 19 68% 5 20% 3 12% 28

Bell College 17 88% 0 1% 2 11% 20

GSA 12 75% 2 13% 2 12% 16

Edinburgh Art 11 73% 2 14% 2 13% 15

RSAMD 7 68% 1 7% 3 25% 10

Total Scotland 1,119,051 54% 533,116 26% 412,169 20% 2,064,336

Student expenditure

• Demand category: – Household expenditure (domestic students)– Tourism expenditure? (RUK and ROW

students)

• Information:– Total, RUK and ROW students– UK data on size and distribution of purchases– IO household consumption data for imports

Demand driven analysisSubject of study Multiplier value

Geographic boundary

St. Andrews University (Blake & McDowall, 1967) 1.45 (GDP)

St. Andrews (pop. 10,000)

Stirling University (Brownrigg, 1973) 1.24 - 1.54

Parts of Sterling and Perth(pop. 96,000)

Strathlcyde, Stirling and St. Andrews Universities(Love & McNicholl, 1988)

1.34, 1.43, 1.36(student spending) Scotland

Aberdeen, Dundee and Stirling Universities(Love & McNicoll, 1990)

2.18 (output), 1.75 (GDP),1.95 (employment) Scotland

Aberdeen University (Battu et al, 1998)1.46 (spending),1.61 (employment) North East of Scotland

Strathclyde University (Kelly et al, 2004)1.63 (output), 1.38 (employment) Scotland

Strathclyde University (McNicholl, 1993) 2.15 (output), 1.66 (income) Scotland

Scottish HEIs (1) 19951.76 (output), 1.7 (employment) Scotland

Scottish HEIs (2) 19991.73 (output), 1.42 (employment) Scotland

Scottish HEIs (3) 20041.6 (output), 1.4 (employment) Scotland

• Assumptions of demand driven IO– No supply constraints– No price effects– Linear homogenous production and demand

functions

Demand driven analysis

Hypothetical Extraction

• Hypothetical extraction of individual Scottish HEIs.– Sector is replaced by imports

• Expenditure impacts of RUK and ROW students.– These students lost to Scotland

GDP of Scottish HEIs

University Impacts

Student Expenditure

Total impact of HEI

Edinburgh 509.4 102.8 612.2

The University of Glasgow 381.6 102.2 483.8

Strathclyde 229.4 108.8 338.2

Dundee 199.9 80.6 280.5

Aberdeen 192.2 59.6 251.9

St Andrews 131.5 37.5 169.0

Caledonian 121.2 73.9 195.1

Heriot-Watt University 118.1 44.3 162.4

Stirling 100.9 38.7 139.6

Napier University 98.4 64.3 162.7

GDP of Scottish HEIs

University Impacts

Student Expenditure

Total impact of HEI

The RG University 90.5 55.4 145.9

The University of Paisley 70.6 56.5 127.1

Scottish Agricultural College 52.3 3.3 55.6

Abertay 38.9 17.9 56.8

QMUC, Edinburgh 33.9 23.4 57.3

UHI Millennium Institute 29.4 28.6 58.0

Bell College 25.5 20.5 46.0

Glasgow School of Art 19.7 6.7 26.4

Edinburgh College of Art 18.3 7.4 25.7

The RSAMD 12.7 2.9 15.6

Total Scotland 2,474 935 3,410

Multiplier impacts

• Aggregate multiplier effects of £100 million spent on HEIs (in general): output, GDP, employment, output multiplier, employment multiplier– Without offsetting reduction in government

expenditure– With offsetting reduction.

Impacts disaggregated by sector (1)GDP Impact of a £100m Increase in HEI Spending (£m)

-100 -50 0 50 100 150

HEIs

Primary & Manufacturing

Utilities

Construction

Distribution & Retail

Hotels, Catering, Transport & Telecom

Real estate, Finance & Business Services

Other Services

Public Admin & Education

Net impact

Se

cto

rs

GDP Impact (£m)

With Spending Substitution

Without Spending Substitution

Impacts disaggregated by sector (2)Effect on Employment of a £100m Increase in HEI Spending

-3000 -2000 -1000 0 1000 2000 3000 4000

HEIs

Primary & Manufacturing

Utilities

Construction

Distribution & Retail

Hotels, Catering, Transport & Telecom

Real estate, Finance & Business Services

Other Services

Public Admin & Education

Net impact

Se

cto

r

Employment (positions)

With Spending Substitution

Without Spending Substitution

Impact of HEIs external income (1)

• 26% of HEIs income external to Scotland– RUK & ROW research funding– Ex-EU tuition fees– 2002: £ 399 m– 2006: £ 533 m– ↑ 34%

Impact of HEIs external income (2)

External income (£m)

GDP impact (£m)

Employment impact

The University of Edinburgh 143.0 172.8 4,284

The University of Glasgow 92.8 112.2 2,780

The University of Aberdeen 54.2 65.5 1,623

The University of Dundee 50.9 61.5 1,524

The University of Strathclyde 45.6 55.1 1,366

The University of St Andrews 42.4 51.3 1,270

Heriot-Watt University 27.1 32.8 812

The University of Stirling 14.0 16.9 418

The Robert Gordon University 11.5 13.9 345

Napier University 9.7 11.8 292

Impact of HEIs external income (3)

External income (£m)

GDP impact (£m)

Employment impact

Glasgow Caledonian University 8.3 10.0 248

UHI Millennium Institute 7.8 9.5 235

Scottish Agricultural College 7.5 9.1 226

Queen Margaret University College, Edinburgh 5.5 6.6 164

The University of Paisley 4.1 4.9 122

University of Abertay Dundee 3.6 4.4 108

Edinburgh College of Art 2.1 2.5 62

Glasgow School of Art 2.0 2.4 60

The Royal Scottish Academy of Music and Drama 0.8 0.9 23

Bell College 0.3 0.3 8

Total Scotland 533.1 644.4 15,970

Future work

• Better disaggregation of the row (Scottish Government)

• Better information on student consumption

• More detailed work on intermediate inputs