April 20th, Shawn Kantor, Ph.D. – Do Research Universities Generate Local Economic Growth?

Abstract: We estimate the local agglomeration spillovers from research university activity in a sample of urban counties. We use the fact that universities follow a rigid endowment spending policy based on the market value of their endowments to identify the causal effect of university activity on labor income in the non-education sector. Our instrument for university expenditures is based on the interaction between each university’s lagged endowment level and the variation in stock market shocks over time. We find modest but statistically significant spillover effects of university activity. Elasticity is no larger than what previous work finds for agglomeration spillovers from other industries, university activity does not appear to make a place any more productive than other forms of economic activity. We do find, however, that the magnitude of the spillover is significantly larger for firms that are technologically closer to universities.

Bio: Shawn Kantor is Professor of Economics at the University of California, Merced where he holds the County Bank Endowed Chair in Economics. He is also a founding faculty member of the university. He is a Research Associate of the National Bureau of Economic Research in Cambridge, MA, and a Fellow of the TIAA-CREF Institute in New York, NY. Kantor’s research explores how economic and political forces interact to influence the process of economic development. He is currently working on a long-term project examining the impact of research universities on American economic growth during the twentieth century.