The Economic Impact of Universities


Anna Valero and John Van Reenen, both of the London School of Economics, have published one of the first studies to examine the impact of universities on national and regional growth, both within nations and across national borders.

This is the abstract of their paper: “We develop a new dataset using UNESCO source materials on the location of nearly 15,000 universities in about 1,500 regions across 78 countries, some dating back to the 11th Century. We estimate fixed effects models at the sub-national level between 1950 and 2010 and find that increases in the number of universities are positively associated with future growth of GDP per capita (and this relationship is robust to controlling for a host of observables, as well as unobserved regional trends). Our estimates imply that doubling the number of universities per capita is associated with 4% higher future GDP per capita. Furthermore, there appear to be positive spillover effects from universities to geographically close neighboring regions. We show that the relationship between growth and universities is not simply driven by the direct expenditures of the university, its staff and students. Part of the effect of universities on growth is mediated through an increased supply of human capital and greater innovation (although the magnitudes are not large). We find that within countries, higher historical university presence is associated with stronger pro-democratic attitudes.”

The complete paper is available at:


I was less surprised at the results of the study than I was by the following pie chart that appears in its appendices:

Pie Chart of No of Universities by Nation

Although I would have guessed that the U.S. has the largest number of universities, I would not have guessed that the next three nations in the rankings would be Brazil, Mexico, and the Philippines.

This calculation does not, of course, make any distinction between the mere quantity and the quality of the universities in the various nations, and thee quantitative totals are skewed by the fact that in some nations–in particular, in India and China—some universities have enrollments that are six to ten times the enrollments at the largest U.S. universities.

But the most significant factor behind these numbers may be that Brazil, Mexico, and the Philippines have been among the nations most open to the introduction of foreign universities, whether with physical campuses or with online offerings. This importation of higher education has undoubtedly been broadly beneficial in increasing access without incurring the very substantial costs in a comparable expansion in the number and size of the nations’ public universities. But the importation of higher education also has short- and long-term costs, some of which are more easily measurable than others. Among the short-term costs have been the same sorts of abuses that we have seen in the for-profit sector in the U.S., in particular among the online for-profits. And the longer-term costs may include less aggressive investment in public colleges and universities and, thus, the slower development of institutions with a truly national purpose and impact.



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