Policymakers are increasingly viewing colleges and universities as important engines of growth for their local areas. In addition to having direct economic impacts, these institutions help to raise the skills of an area’s workforce (its local “human capital”), and they do this in two ways. First, by educating potential workers, they increase the
supply of human capital in a region. Perhaps less obviously, these schools can also raise a region’s
demand for human capital by helping local businesses create jobs for skilled workers. In this post, we draw on our recent
academic research and
Current Issues article to outline these pathways and how they might inform local economic development policy. (We also discuss our findings in a
new video.)
Colleges and universities are assets to their regional economies, especially because they spend money in their local areas and employ local workers. The higher-education sector also tends to contribute stability to a region since it’s less susceptible to downturns than other sectors of the economy. Indeed, the education sector expanded before, during, and after the Great Recession.