Transcript The overall regional impact of Scottish HEIs

European Regional Science Association
27-31 August 2008, Liverpool
Special Sessions on The Impact of HEIs on Regional Economies
The overall regional impact of Scottish HEIs:
An illustrative CGE analysis of the impact of
their “demographic challenge”
Kristinn Hermannsson
Katerina Lisenkova
Peter McGregor
Nikos Pappas
Kim Swales
Fraser of Allander Institute, Department of Economics, University of Strathclyde;
Centre for Public Policy for Regions (CPPR), Universities of Glasgow and Strathclyde
Introduction
One major gap we are tackling in our project is the macroeconomic or
system-wide impact of HEIs on the host region: especially the neglect of the
supply side.
HEI-disaggregated input-output (IO) analyses are a useful contribution
• Extremely useful databases created; results transparent
But, as the best practitioners (many of whom are on our team!) recognise,
these studies:
• Embody a restrictive view of host region’s economy (excess
capacity, significant unemployment) – passive supply side
• Focus on the demand-side effects and are “one-shot” in nature
We develop a CGE approach, but here focus simply on the demand effects
implied by the “demographic challenge” facing Scottish HEIs.
The “demographic challenge” for
HEIs
• Demographic changes in the UK are projected
to result in a fall in the number of students
• Recent Universities UK report makes projections
of likely numbers of students
• We provide a CGE analysis of likely impacts on
Scottish economy of Universities UK scenarios
20
05
20
04
-0
6
-0
5
-0
4
-0
3
Male
20
03
20
02
-0
2
-0
1
-0
0
-9
9
-9
8
-9
7
-9
6
-9
5
Total
20
01
20
00
19
99
19
98
19
97
19
96
19
95
19
94
Age Participation Index
60%
50%
40%
Female
30%
In 2007 71% of the first year fulltime UK-domiciled undergraduates
were aged 18-20
Population aged 18-20
Scotland
2006-based principal GAD/ONS projection
210,000
-11.0%
190,000
180,000
170,000
160,000
-16.9%
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
150,000
2005
thousands of persons
200,000
UUK projections
• Two types of projections in UUK report:
– Baseline projection – based on demographic factors
• Projected age/gender/ethnicity composition of the UK
population
• Projected population of EU countries
• Projected number of non-EU students
• Projected conversion rate from undergraduate to
postgraduate study (increasing in line with recent trends)
– Three scenarios – take into account how HEIs may
react to these changes
Projected total number of
students (FTE*): UUK baseline
200000
thousands of students, FTE
190000
180000
170000
-6.8%
160000
150000
-11.4%
Source: Universities UK, own calculations
*FTE – full-time equivalent; part-time students added with coefficient 0.5
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
140000
Projected total number of
students (FTE): baselines?
200000
Alternative baseline is proportional
to the population of 18-20 year olds
thousands of students, FTE
190000
180000
170000
160000
Baseline
150000
Alternative baseline
Source: Universities UK, own calculations
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
140000
Description of scenarios
Scenario 1
Scenario 2
Scenario 3
Slow adaptation to change
Market-driven and competitive
Employer-driven flexible learning
Participation of
young people
As now but with some switch
from full-time to part-time
Reduced participation in full-time
but increased participation in
part-time
Substantial reduction in full-time, but
on headcount basis participation at
current level
Participation of
older people
Modestly increased
Substantially increased
Substantially increased
Employer
engagement
Modestly change, mainly
through increased influence on
the curriculum
Increased but not necessarily
primarily with publicly funded
HEIs
Substantially increased – employers
are the primary drivers of large
proportion of public funding
Competition (UK)
Increased competition amongst
publicly funded providers
Significant expansion of the range
of private providers – fierce
competition for UK students
Highly stratified and polarised
system with only limited
competition
Competition (int-l)
UK HEIs compete effectively
despite increased competition
UK HEIs compete less well
With the exception of elite HEIs, UK
HEIs compete less well. However,
they engage with technology-based
borderless education
Technology-based
learning
Some increase in e-learning, but
face-to-face learning is the
predominant mode
Substantial increase in elearning
E-learning is the predominant
mode
Academic staffing
As now with academic staff
undertaking teaching and
research
Two streams: one – research
and teaching in large HEIs, the
other – teaching in small HEIs
Flexible academic workforce. Increased
movement between academia and
business. Significant part of academic
staff becomes self-employed,
contracting work at several HEIs
Projected total number of
students (FTE): all scenarios
200000
thousands of students, FTE
190000
180000
Baseline
170000
Scenario1
160000
Scenario2
Scenario3
150000
Alternative baseline
Source: Universities UK, own calculations
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
140000
Two types of impact of declining
number of students
• Loss of income by HEIs
– Some sources of HEIs’ income depend on number of
students
– An assumption is that per student funding will stay at
the 2005 level (HESA data)
– Different types of funding depend on number of each
type of student
• Loss of non-Scottish student’s expenditures
– A decline in the number of non-Scottish students will
lead to lower demand in other sectors
Sources of Scottish HEIs income
• Funding Council grants
– Recurrent grants (Teaching) –proportional to the number of Scottish
students (FTE)
– Recurrent grants (Research)
– Recurrent grants (other)
• Tuition fees & education grants & contracts
– Home & EU domicile
• Full-time fees – proportional to the number of full-time home and EU
students
• Part-time fees – proportional to the number of full-time home and EU
students
– Non-EU domicile – proportional to the number of non-EU students
(FTE)
• Research grants & contracts; Other income
AMOS-HEI: a CGE model of the
Scottish economy
• Effectively a regional, empirical, general equilibrium variant of the Layard, Nickell and
Jackman (LNJ) model. So the supply side is crucial (and, of course, non-passive)
• Multisectoral CGE calibrated on 2006 Scottish Social Accounting Matrix, with HEIs as
one sector:
– 25 sectors, cost minimisation
– 3 domestic transactor groups
• Goods markets modelled as competitive, with equilibrium relative prices determined
simultaneously by demand and supply
– Demands fairly conventional
– Trade flows sensitive to relative prices
• Labour market imperfectly competitive, though unified
– characterised by regional bargaining - wage curve (w, u negatively related) - LNJ variant
AMOS-HEI (continued)
• Second element of flexibility - population is
– Fixed or Harris-Todaro (w, u positively related) - LNJ variant
– When combined with wage curve the two relations tie down w, u
• Final element of flexibility relates to treatment of capital stocks, which are
– either fixed (total and composition)
– or gradually adjusted to optimal level, driven by gap of rental rates and user costs
• Dynamics in model are recursive: sectoral capital stocks updated each period
through investment functions; population updated via the migration function
• Financial markets fully integrated and not modelled explicitly
• How does AMOS-HEI relate to IO models of HEI impacts?
–
–
–
–
Full specification of the supply side
Can therefore capture heterogeneity among regions (e.g. supply constraints?)
Relative prices (competitiveness) endogenously determined
But, if supply-side is passive, AMOS-HEI converges on comparable IO models
Impact of the loss of income by
HEIs: baseline
2006
2010
2015
2020
2025
GDP (£m)
0.000
10.434
-15.325
-62.043
-73.158
Total employment ('000)
0.000
0.261
-0.378
-1.633
-2.020
Unemployment (%)
5.797
5.792
5.806
5.815
5.798
CPI (%change)
0.000
0.016
-0.029
-0.063
-0.017
Real wage (% change)
0.000
0.010
-0.018
-0.034
-0.001
HEI sector employment('000)
0.000
0.346
-0.594
-1.670
-1.152
UUK baseline
Impact of the loss of income by
HEIs: all scenarios
2006
2010
2015
2020
2025
2026
UUK baseline
GDP (£m)
Employment ('000)
CPI (%change)
0.000
0.000
0.000
10.434
0.261
0.016
-15.325
-0.378
-0.029
-62.043
-1.633
-0.063
-73.158
-2.020
-0.017
-74.869
-2.051
-0.016
Scenario1
GDP (£m)
Employment ('000)
Unemployment (%)
CPI (%change)
Real wage (% change)
HEI sector employment('000)
0.000
0.000
5.797
0.000
0.000
0.000
15.015
0.379
5.790
0.022
0.013
0.486
-2.767
-0.042
5.804
-0.019
-0.013
-0.299
-40.618
-1.057
5.812
-0.052
-0.029
-1.246
-42.942
-1.210
5.795
-0.004
0.004
-0.621
-39.913
-1.123
5.793
0.002
0.007
-0.479
0.000
0.000
0.000
7.359
0.182
0.012
-23.555
-0.598
-0.035
-75.941
-2.007
-0.070
-93.255
-2.558
-0.025
-98.651
-2.680
-0.029
GDP (£m)
0.000
-3.808
-53.704
-127.030
-165.986
-179.044
Employment ('000)
CPI (%change)
0.000
0.000
-0.104
-0.003
-1.402
-0.059
-3.380
-0.097
-4.506
-0.055
-4.822
-0.065
0.000
0.000
0.000
1.681
0.037
0.004
-38.773
-1.004
-0.047
-99.895
-2.657
-0.081
-116.499
-3.188
-0.026
-116.197
-3.172
-0.018
Scenario2
GDP (£m)
Employment ('000)
CPI (%change)
Scenario3
Alternative baseline
GDP (£m)
Employment ('000)
CPI (%change)
GDP impact of the fall in student
numbers: baseline
90200
90150
90050
90000
UUK baseline
89950
Alternative baseline
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
89900
2006
£m
90100
GDP impact of the fall in student
numbers: baseline
90200
90150
90050
90000
89950
HEI income only
Including student's expenditures
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
89900
2006
£m
90100
GDP impact of the loss of income
by HEIs : all scenarios
90200
90150
UUK baseline
90050
Scenario1
90000
Scenario2
Scenario3
89950
Alternative baseline
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
89900
2006
£m
90100
Employment impact of the fall in
student numbers: baseline
2406
2405
2403
2402
2401
2400
2399
2398
HEI income only
Including student's expenditures
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2397
2006
thousands of jobs
2404
Employment impact of the loss of
income by HEIs : all scenarios
2406
2405
2403
UUK baseline
2402
Scenario1
2401
Scenario2
2400
Scenario3
2399
Alternative baseline
2398
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2397
2006
thousands of jobs
2404
-0.2
Other Services
Public admin and
Education
Business Services
Real Estate
Financial Services
Telecommunications
Transport
Hotels, Catering,
Pubs, etc
Trade & Distribution
Construction
Electricity, Gas &
Water
Other Manufacturing
Machinery
Metallurgy
Glass, Ceramics,
Cement & Concrete
Chemical industry
Value Added
Printing and
Publishing
Wood & Paper
Apparel, Leather &
Footwear
Textile
-0.1
Drinks & Tobacco
Food
Mining
Agriculture, Forestry &
Fishing
% change
Sectoral impact (excluding HEI):
baseline, 2006 % change
0.05
0
-0.05
Total employment
-0.15
The impact of meeting Universities Scotland’s
claim for a 15% real increase in
government expenditure on HEIs.
(Assuming no supply-side impacts.)
(Externally funded by UK Government; internally funded through cutting other Scottish
government expenditures)
2006
2007
2008
2009
2010
2011
Externally funded
GDP (£m)
Real wage (£000’s)
Unemployment rate
Employment (no of jobs)
Price of Exported goods % change
CPI % change
0.00
0.00
5.80
0
0.00
0.00
12.62
0.00
5.79
265
0.03
0.02
27.95
0.00
5.79
601
0.06
0.04
45.07
0.01
5.78
1010
0.08
0.05
63.10
0.01
5.78
1467
0.09
0.06
82.93
0.01
5.77
1948
0.11
0.08
Internally funded
GDP (£m)
Real wage (£000’s)
Unemployment rate
Employment (no of jobs)
Price of Exported goods % change
CPI % change
2006
0.00
0.00
5.80
0
0.00
0.00
2007
2.70
0.00
5.80
-120
0.01
0.00
2008
6.31
0.00
5.80
-216
0.02
0.01
2009
9.01
0.00
5.81
-337
0.03
0.01
2010
11.72
0.00
5.81
-409
0.04
0.01
2011
14.42
0.00
5.81
-529
0.04
0.01
Conclusions and future research
• Explore UUK scenarios in more detail, providing sensitivity analyses of
their demographic and scenario projections
• Capture the supply-side impacts of HEIs
– Need to generate new micro-econometric evidence on both skill and
spillover impacts;
– student and graduate migration flows, and incorporate these into the CGE
• Extension to other countries of the UK
• Then extend to close other gaps in our knowledge
– disaggregation of HEIs?
– interregional context
– wider impacts of HEIs