Does graduate human capital production increase local economic development? An instrumental variable approach

Abstract

Using a survey on Italian graduates, we investigate whether universities' degree production affects the economic development of the regions where academic institutions are located. To deal with suspected endogeneity between human capital development and economic growth, we employ an instrumental variable approach, using a global lump sum transferred to each university as an instrument for human capital production. Once we control for the regional flow of mobile students and graduates, the findings reveal the beneficial effect of the university system on local economic development through the gain in human capital.

Higher education systems and regional economic development in Europe: A combined approach using econometric and machine learning methods

“…At the same time, universities are known to act as labour-intensive enterprises (Yen et al, 2015) which produce direct economic effects on the local economy by creating a new demand for local goods and services (Hermannsson et al, 2017;Steinacker, 2005). However, the literature studying the overall economic contribution of universities is only recent and presents partial evidence (Valero and Van Reenen, 2019;Amendola et al, 2020).…”

“…Some papers focus on specific characteristics of universities in contributing to local economic performance. Amendola et al (2020) investigated the effects of the graduate human capital of universities on regional economic development of Italian provinces. Controlling for the mobility of students and endogenous regressors, the authors found that HESs positively affect the local economy, with stronger effects for graduates in technological fields and universities with a high reputation and located in the most-developed areas.…”

“…Firstly, a specific viewpoint that has policy relevance is the relationship between universities and local economy. Empirical evidence on the relationships between regional economic development and university systems is limited (Valero and Van Reenen, 2019;Amendola et al, 2020). At the country level, human capital (measured, for example, in educational attainment) can be generally associated with the national educational system.…”

“…The analyses presented here develop the existing knowledge in four crucial directions. Firstly, the paper brings new empirical evidence into the debate on the role of universities in influencing the local economy, evidence which still scarcely offers quantitative estimates on these relationships (Valero and Van Reenen, 2019;Amendola et al, 2020). Secondly, the analysis provides a more comprehensive approach in characterising HESs, making an explicit analysis of the universities' heterogeneity across HESs, by developing a framework of 15 indicators.…”

Factores de desarrollo local desde el enfoque de la gestión organizativa

“…Al mismo tiempo, existen algunos investigadores que observan que los factores objetivos causan contradicciones entre las capacidades de recursos de los territorios, el potencial humano y la baja eficiencia del sistema de gobierno local (Amendola et al, 2020).…”