How universities make cities great

When thinking about how to revive economically lagging regions, especially in the Rust Belt, universities have an important role. Big, high-quality research universities have been essential for creating technology clusters in Austin, Raleigh and San Diego. But even small colleges in rural areas can have big benefits for the surrounding area, writes Noah Smith for Bloomberg.

Why are colleges so great? To use universities as a tool for economic development, it’s important to think about the many ways they contribute to local growth – and some ways they don’t. Careful research by economists Jaison Abel and Richard Deitz confirms that there’s only a weak relationship between the number of degrees a university produces and the number of educated people who live in the area.

If colleges are paying to educate the future workforces of far-off cities and states, some might think there’s no reason for a city or state to spend money on a local university. But there is a good reason. Even as universities lose graduates to other regions, they attract other smart, educated people. Abel and Deitz find that university research expenditures have a strong effect on the number of educated people in a region – over four times as strong as the effect of degree production. This is partly because skilled workers come to do research at the university itself. But most of the effect comes from private-sector activity in the surrounding economy.
Full report on the Bloomberg site