The Expenditure Impacts of Individual Higher Education Institutions and Their Students on the Scottish Economy under a Regional Government Budget Constraint: Homogeneity or Heterogeneity?

Abstract

Comparing each of the higher education institutions (HEIs) as a separate sector in the Scottish input—output table suggests that their expenditure patterns are homogenous and that any apparent heterogeneity in their conventional demand impacts depends primarily on scale. However, a disaggregation of their income by source reveals a disparity in their degree of dependence upon funding from the devolved Scottish Government. Acknowledging the binding budget constraint of the Scottish Government, and deriving balanced-expenditure multipliers, reveals large differences in the net-expenditure impact of HEIs upon the Scottish economy, with the source of variation being the origin of income. Applying a novel treatment of student expenditure impacts through identifying the amount of exogenous spending per student further increases the heterogeneity of the overall expenditure effects. These issues have particular importance for many governments facing increasing pressure to reduce their overall budgets.