The importance of graduates to the Scottish economy: a “micro to macro" approach

Kristinn Hermannsson, Peter McGregor, John Swales, Patrizio Lecca, Katerina Lisenkova

Research output: Working paperDiscussion paper

Abstract

There have been numerous attempts to assess the overall impact of Higher Education Institutions on regional economies in the UK and elsewhere. There are two disparate approaches focussing on: demand-side effects of HEIs, exerted through universities’ expenditures within the local economy; HEIs’ contribution to the “knowledge economy”. However, neither approach seeks to measure the impact on regional economies that HEIs exert through the enhanced productivity of their graduates. We address this lacuna and explore the system-wide impact of the graduates on the egional economy. An extensive and sophisticated literature suggests that graduates enjoy a significant wage premium, often interpreted as reflecting their greater productivity relative to non-graduates. If this is so there is a clear and direct supply-side impact of HEI activities on regional economies through the employment of their graduates. However,
there is some dispute over the extent to which the graduate wage premium reflects innate abilities rather than the impact of higher education per se.
We use an HEI-disaggregated computable general equilibrium model of Scotland to estimate the impact of the growing proportion of graduates in the Scottish labour force that is implied by the current participation rate and demographic change, taking the graduate wage premium in Scotland as an indicator of productivity enhancement. We conduct a range of sensitivity analyses to assess the robustness of our results. While the detailed results do, of course, vary with alternative assumptions about future graduate retention rates and the size of the graduate wage premium, for example, they do suggest that the long-term supply-side impacts of HEIs provide a significant boost to regional GDP. Furthermore, the results suggest that the supply-side impacts of HEIs are
likely to be more important than the expenditure impacts that are the focus of most “impact” studies.
LanguageEnglish
Number of pages42
Publication statusPublished - 2010

Fingerprint

Wages
Premium
Productivity
Supply side
Regional economy
Side impact
Expenditure
Scotland
Robustness
Impact studies
Participation rate
Higher education institutions
Enhancement
Knowledge economy
Demographic change
Labor force
Proportion
Dispute
Local economy
Computable general equilibrium model

Keywords

  • Higher Education Institutions
  • human capital
  • CGE
  • graduates
  • labour supply
  • economic impact

Cite this

@techreport{995e31e717ba4fd7af111fe470984149,
title = "The importance of graduates to the Scottish economy: a “micro to macro{"} approach",
abstract = "There have been numerous attempts to assess the overall impact of Higher Education Institutions on regional economies in the UK and elsewhere. There are two disparate approaches focussing on: demand-side effects of HEIs, exerted through universities’ expenditures within the local economy; HEIs’ contribution to the “knowledge economy”. However, neither approach seeks to measure the impact on regional economies that HEIs exert through the enhanced productivity of their graduates. We address this lacuna and explore the system-wide impact of the graduates on the egional economy. An extensive and sophisticated literature suggests that graduates enjoy a significant wage premium, often interpreted as reflecting their greater productivity relative to non-graduates. If this is so there is a clear and direct supply-side impact of HEI activities on regional economies through the employment of their graduates. However,there is some dispute over the extent to which the graduate wage premium reflects innate abilities rather than the impact of higher education per se.We use an HEI-disaggregated computable general equilibrium model of Scotland to estimate the impact of the growing proportion of graduates in the Scottish labour force that is implied by the current participation rate and demographic change, taking the graduate wage premium in Scotland as an indicator of productivity enhancement. We conduct a range of sensitivity analyses to assess the robustness of our results. While the detailed results do, of course, vary with alternative assumptions about future graduate retention rates and the size of the graduate wage premium, for example, they do suggest that the long-term supply-side impacts of HEIs provide a significant boost to regional GDP. Furthermore, the results suggest that the supply-side impacts of HEIs arelikely to be more important than the expenditure impacts that are the focus of most “impact” studies.",
keywords = "Higher Education Institutions, human capital, CGE, graduates, labour supply, economic impact",
author = "Kristinn Hermannsson and Peter McGregor and John Swales and Patrizio Lecca and Katerina Lisenkova",
year = "2010",
language = "English",
type = "WorkingPaper",

}

The importance of graduates to the Scottish economy : a “micro to macro" approach. / Hermannsson, Kristinn; McGregor, Peter; Swales, John; Lecca, Patrizio; Lisenkova, Katerina.

2010.

Research output: Working paperDiscussion paper

TY - UNPB

T1 - The importance of graduates to the Scottish economy

T2 - a “micro to macro" approach

AU - Hermannsson, Kristinn

AU - McGregor, Peter

AU - Swales, John

AU - Lecca, Patrizio

AU - Lisenkova, Katerina

PY - 2010

Y1 - 2010

N2 - There have been numerous attempts to assess the overall impact of Higher Education Institutions on regional economies in the UK and elsewhere. There are two disparate approaches focussing on: demand-side effects of HEIs, exerted through universities’ expenditures within the local economy; HEIs’ contribution to the “knowledge economy”. However, neither approach seeks to measure the impact on regional economies that HEIs exert through the enhanced productivity of their graduates. We address this lacuna and explore the system-wide impact of the graduates on the egional economy. An extensive and sophisticated literature suggests that graduates enjoy a significant wage premium, often interpreted as reflecting their greater productivity relative to non-graduates. If this is so there is a clear and direct supply-side impact of HEI activities on regional economies through the employment of their graduates. However,there is some dispute over the extent to which the graduate wage premium reflects innate abilities rather than the impact of higher education per se.We use an HEI-disaggregated computable general equilibrium model of Scotland to estimate the impact of the growing proportion of graduates in the Scottish labour force that is implied by the current participation rate and demographic change, taking the graduate wage premium in Scotland as an indicator of productivity enhancement. We conduct a range of sensitivity analyses to assess the robustness of our results. While the detailed results do, of course, vary with alternative assumptions about future graduate retention rates and the size of the graduate wage premium, for example, they do suggest that the long-term supply-side impacts of HEIs provide a significant boost to regional GDP. Furthermore, the results suggest that the supply-side impacts of HEIs arelikely to be more important than the expenditure impacts that are the focus of most “impact” studies.

AB - There have been numerous attempts to assess the overall impact of Higher Education Institutions on regional economies in the UK and elsewhere. There are two disparate approaches focussing on: demand-side effects of HEIs, exerted through universities’ expenditures within the local economy; HEIs’ contribution to the “knowledge economy”. However, neither approach seeks to measure the impact on regional economies that HEIs exert through the enhanced productivity of their graduates. We address this lacuna and explore the system-wide impact of the graduates on the egional economy. An extensive and sophisticated literature suggests that graduates enjoy a significant wage premium, often interpreted as reflecting their greater productivity relative to non-graduates. If this is so there is a clear and direct supply-side impact of HEI activities on regional economies through the employment of their graduates. However,there is some dispute over the extent to which the graduate wage premium reflects innate abilities rather than the impact of higher education per se.We use an HEI-disaggregated computable general equilibrium model of Scotland to estimate the impact of the growing proportion of graduates in the Scottish labour force that is implied by the current participation rate and demographic change, taking the graduate wage premium in Scotland as an indicator of productivity enhancement. We conduct a range of sensitivity analyses to assess the robustness of our results. While the detailed results do, of course, vary with alternative assumptions about future graduate retention rates and the size of the graduate wage premium, for example, they do suggest that the long-term supply-side impacts of HEIs provide a significant boost to regional GDP. Furthermore, the results suggest that the supply-side impacts of HEIs arelikely to be more important than the expenditure impacts that are the focus of most “impact” studies.

KW - Higher Education Institutions

KW - human capital

KW - CGE

KW - graduates

KW - labour supply

KW - economic impact

M3 - Discussion paper

BT - The importance of graduates to the Scottish economy

ER -