The Effect of Postsecondary Educational Institutions on Local Economies

Despite worldwide expansion of higher education, the impact of higher education institutions on local economic activity is still poorly understood. The paper presented in this PRICE Seminar analyzes the local economic effects of branch campus openings in Tennessee and Texas, two states representative of the underlying U.S. enrollment patterns. To overcome the lack of adequate data, the authors use a novel proxy for regional economic activity based on daytime satellite imagery. Applying different panel methods—traditional difference-in-differences (DD), heterogeneity-robust DD, and instrumental variables—they find positive effects. Independent data show an increase in college graduates and employment in the sectors aligned with programs offered at branch campuses.