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The Economic Impact of the Universities in the State of Baden-Württemberg


Abstract and Figures

The rise of global competition in a knowledge society and budget cuts in public spending have spurred an interest in the effects of universities on their regional economies. In contrast to the legacy of local impact analysis, this study examines the economic impact of an entire university landscape on a large regional economy: the federal state of Baden-Württemberg in Germany. Its methodology overcomes some of the traditional challenges and develops a differential incidence approach by benchmarking the impacts of universities against alternative public expenditures. Empirically, this study reveals that Baden-Württemberg’s nine public universities multiply initial state funding by a factor higher than two in regional impact. They account for an annual aggregate economic impact of €3.7 billion in value-added, 63,000 jobs, and €350 million in tax revenues. The attraction of students and research funding from outside the regional economy are found to be major levers when compared to alternative public expenditures.
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Chapter 15
The Economic Impact of the Universities
in the State of Baden-Württemberg
Johannes Glückler, Robert Panitz, and Christian Wuttke
A geographical understanding of the role of universities in society includes an
appraisal of the impact they have on their regional economies. Over the past twenty
years, academic and public interest in the economic effects of higher education
institutions has risen dramatically. Two reasons for this change are the increasing
globalization of and the mounting economic competition for knowledge and inno-
vation. Because economic development depends ever more on creativity and inno-
vation, academia and the public have sought to improve the understanding of the role
that universities play in economic growth. This search is manifested in conceptual
approaches such as national and regional innovation systems (Cooke, Heidenreich,
& Braczyk, 2004; Lundvall, 1992), varieties of capitalism (Hall & Soskice, 2001),
and the triple-helix model (Etzkowitz, 2008; see chapter by Etzkowitz in this
volume). Further reasons for the elevated interest in the impact of universities are
recent retrenchment policies in the aftermath of the nancial and economic crises in
North America and Europe since 2008. Budget constraints have intensied the
competition for public funding, calling for more detailed assessments of the benets
of higher education as compared to alternative uses of funding (e.g., Hamm &
Wenke, 2002). The competition is not only for direct funding but also for land use
in urban planning, with universities pressing the argument that their positive eco-
nomic impact on the city trumps alternative uses.
It is utterly impossible to quantify all the diverse economic impacts that univer-
sities have on the economy, especially over long periods and from geographical
perspectives. A research activity, for example, may promote the production of new
knowledge as well as the qualication of students and, many years later, may
generate spin-offs or royalties from patent-related contracts. The sheer breadth of
the universitys activities and contributions to society and the economy is
J. Glückler (*) · R. Panitz · C. Wuttke
Department of Geography, Heidelberg University, Heidelberg, Germany
©The Author(s) 2018
P. Meusburger et al. (eds.), Geographies of the University, Knowledge and Space 12,
extraordinary (Bathelt & Schamp, 2002; Drucker & Goldstein, 2007; Goldstein,
Maier, & Luger, 1995; Goldstein & Renault, 2004; Salter & Martin, 2001). Univer-
sities generate new knowledge and qualify experts who, being mobile, can foster
regional innovative strength (Breschi & Lissoni, 2009). Universities are engaged in
knowledge transfer partly through contract research on the regional and interregional
economy (Ponds, van Oort, & Frenken, 2010), and they are sources of technical
innovations that spur the economy through patents or spin-offs (Vincett, 2010).
Universities also often constitute the core of regional knowledge infrastructures by
facilitating knowledge exchanges permeable enough for private business and the
public sector (Owen-Smith & Powell, 2004). Moreover, universities are often
committed to their regional community: They actively participate in civil society
in general through political processes of decision-making and policy formation
(Glückler & Ries, 2012; Glückler & Suarsana, 2014; Goddard, Hazelkorn, Kempton,
& Vallance, 2016; Goddard & Vallance, 2013; see also chapter by Goddard in this
volume) and inuence the regional milieu through intellectual, cultural, artistic, and
moral stimulation that dynamizes social and economic life. All these dimensions of
qualication, innovation, social responsibility, and empowerment are so diverse,
often overlapping, and fundamentally long term in their effects on a society and its
economy that they are indisputably still too complex to be expressed monetarily.
In addition to these qualitative long-term impacts, universities have quantitative
short-term monetary effects. What the university and its members spend on regional
goods and services increases autonomous demand and leverages production and
employment within a region and beyond. Although this quantiable periodic impact
of universities is just one of their many effects, we make it the sole focus of this
chapter in the context of Baden-Württemberg, a large federal state of Germany. It is
one of sixteen states in the countrys relatively decentralized politicoadministrative
system, which grants each state considerable autonomy in matters of educational
policy and budgeting. Studies on the impact attributable to organizations of higher
education have a long tradition (Eisen, 1948) and have taken place on various
geographical scales. In Germany, however, such studies have been conducted
mostly at the geographic level of local catchment areas of university regions. In
Baden-Württemberg these assessments are documented for the universities of Frei-
burg (Drude, 1995), Heidelberg (Glückler & König, 2012; Gormsen, 1981; Grabitz,
1990), Constance (Fürst, 1979; Oser & Schroeder, 1995), and Stuttgart (Becker,
Heinemann-Knoch, & Weeber, 1976), and for the Karlsruhe Institute of Technology
(Kowalski & Schaffer, 2012). With rare exceptions, such as Berlin (DIW econ,
2013) and Rhineland-Palatinate (Spehl et al., 2005), the impact assessments focus on
local catchment areas rather than an entire university landscape in large economic
If Baden-Württemberg were a sovereign state, it would rank as the worlds 18th
largest national economy, immediately before Belgium.
It is home to 80 universities
This calculation is our own for 2012 and is based on OECD and Macroeconomic Accounts of the
Federal States (Volkswirtschaiche Gesamtrechnung der Länder, VGRdL).
480 J. Glückler et al.
and 55 nonuniversity research centers, with 49 of the latter facilities being located
next to one of the universities. Of these 80 universities, nine are public higher
education institutions whose interests are collectively represented in the Baden-
Württemberg State RectorsConference, which has called for an independent
analysis of the economic impacts of its nine comprehensive universities.
signicance of the state universities in Baden-Württembergs university landscape
is remarkable. Although they account for only 11% of the states institutions of
higher learning (9 out of 80), they train more than half (160,000 students in 2012) of
the states future generation of academics (Statistisches Landesamt Baden-
Württemberg, 2012). These nine universities raised over 90% of Baden-
Württembergs third-party funding (or Drittmittel, hereafter called external funding)
for research and teaching (Tanzmann, 2015), another sign of the disproportionate
signicance of the state universities.
In this chapter we rst outline our research strategy for surpassing the validity and
precision of conventional impact analyses of regional effects. Second, we describe
our original data collection, methodology, and several key economic indicators with
which to measure the monetary impact of the university landscape in Baden-
Württemberg. The validity of the method rests on detailed, regionalized primary
data on the expenditures of all the universities, enabling us to provide improved
estimates of the regional multiplier effects by simultaneously considering rises in
production and employment. Third, we present a differential incidence analysis to
assess the impact surplusof state universities relative to alternative uses of the
same public funding. Overall, we argue that the university landscapes monetary
economic impact on the regional economy of Baden-Württemberg is hardly attain-
able by alternative uses and that its true compound social and economic benetis
still vastly underestimated.
Research Strategy and Methods
The pecuniary quantitative assessment of the economic impact of university spend-
ing is subject to three quality risks that our investigation overcomes with especially
valid primary data and several methodological adjustments. The rst challenge lies
in correctly determining the payment ows of university spending, especially their
regionalization, for the share of regional expenditures will be decisive for computing
overall regional impact. This study is based on a unique database that sharply
distinguishes between university spending and other expenditures at the state level.
This chapter elaborates on an impact assessment of Baden-Württembergs nine state universities
(Glückler, Panitz, & Wuttke, 2015) and a study of Heidelberg Universitys impact on its local
catchment area (Glückler & König, 2012). The analysis encompasses the universities of Freiburg,
Heidelberg, Hohenheim, Constance, Mannheim, Stuttgart, Tübingen, Ulm, and the Karlsruhe
Institute of Technology (including the medical schools of the universities of Freiburg, Heidelberg,
Tübingen, and Ulm, but not their hospitals).
15 The Economic Impact of the Universities in the State of Baden-Württemberg 481
The second challenge lies in assessing the multiplier effects of direct regional
demand, inasmuch as additional demand for goods in the region leads to simulta-
neous increases in production and employment in the other upstream and down-
stream sectors of the economy. Theoretically, assessment of this multiplier effect
requires detailed knowledge of the intersectorial division of labor in the regional
economic structure and of the regional populations income-dependent consumption
proles. Little of this information is available at the regional level, however, so
analysts must estimate these multipliers on the basis of assumptions. In conventional
impact analyses the regional economic effect is ascertained either by means of
regional supplier interdependencies (Giarratani, 1976) or through an estimate of
the regional increases in income (Bathelt & Schamp, 2002; Glückler & König,
2012). Either approach alone underestimates overall regional impact. The procedure
in this chapter combines the two multipliers, improving the quality of the results
(Pischner & Stäglin, 1976).
The third challenge lies in the erroneous assumption that the achieved regional
effects would be absent if their source did not exist (Blume & Fromm, 1999).
Although this assumption seems defensible for small areas, it is not tenable in
large regions (Stoetzer & Krähmer, 2007) such as Baden-Württemberg. Particularly
in large regions one must assume that funds saved in one place can (and generally
will) be spent elsewhere within the limits set by the public budget. A few impact
analyses pertaining to a federal state (DIW econ, 2013; Spehl et al., 2005) have
ascertained only the absolute incidence. The study presented in this chapter is special
in that it characterizes the differential impact of an entire university landscape in
relation to alternative uses.
Computation of the Direct Economic Effect
The overall effect of the regional economic impact analysis is the sum of direct,
indirect, and induced effects. The analysis starts with the gross spending of the
universities and their members. This demand comprises three expenditure ows
(Blume & Fromm, 1999): (a) university expenditures for investments and for goods
and services, (b) university expenditures for the wages and salaries of their
employees, and (c) student living expenses. Proceeding from this gross spending,
analysts must rst determine its direct effect, that is, what part of it translates into
demand in the region. To do so, they must calculate two things: the gross spendings
impact on consumption, and that consumptions impact within the region.
First, there is the impact on demandthe direct consumption-related demand as
expressed by the universitys total spending on personnel, investments, and mate-
rials and by student expenditures after deduction of taxes, social security premiums,
and other levies. This computation is easy for investments and spending on goods
because those amounts have direct impact as payments to suppliers. It is harder to
determine the impacts that wages, salaries, and student budgets have on consump-
tion. As in previous studies, wage and salary taxes and social security premiums are
482 J. Glückler et al.
deducted from wages and salaries
because the taxes and premiums are not directly
available for consumption. University wages and salaries are reduced by an addi-
tional amount presumed to be saved. One arrives at that sum by multiplying wages
and salaries by the average savings ratio of the population in Baden-Württemberg.
Because almost all students have a low income, their consumption ratio is assumed
to be 100%, minus administrative contributions, which are transferred in full to the
state administration.
Second, regionalization determines the share of expenditures that are made within
the region under study and that have a direct effect on demand. For lack of detailed
data, researchers normally make numerous assumptions to estimate the regional
distribution of expenditures (Friedrich & Rahmig, 2013; Kowalski & Schaffer,
2012). However, it is the geographic differentiation of expenditure ows that
inuences the overall regional effect most. Downstream specications of the impact
model depend signicantly on the quality of these primary expenditure ows. In late
January 2013 we joined with controlling experts of the nine state universities of
Baden-Württemberg to standardize the requirements for the relevant data. Hence, all
expenditures accounted for in the present study are itemized according to their type
of origin and the geographic distribution of the payment ows (Table 15.1). This
highly selective procedure has enabled us to track the ows of university spending in
unprecedented geographical detail.
Nevertheless, analysts must still make numerous assumptions when computing
effects (Table 15.2). To take account of the mobility of university personnel, we
assume, as a correction based on Blume & Fromm (1999), that 80% of the short-term
outlays by university personnel residing in Baden-Württemberg occur at their place
of residence and 10% at their place of work. These gures sum to a regional quota of
90%. Conversely, we assume that 10% of the short-term outlays by university
personnel residing outside Baden-Württemberg occur at their place of work. Student
spending within and outside Baden-Württemberg is regionalized analogously. Stu-
dents residing in Baden-Württemberg thus have a regional quota of 90%; those
outside, 10% (Blume & Fromm, 1999). The direct effect of university demand is
dened as the funding that is computed above as having an impact on demand and as
being spent in the region.
Computation of the Indirect and Induced Economic Effects
Direct spending constitutes an autonomous rise in regional demand, which triggers a
corresponding rise in production and associated supplies in related sectors of the
economy. This rise in production is called the indirect effect of university demand
and is ascertained during the analysis of production multipliers (Leontief, 1936). The
In macroeconomic accounting the civil servant allowance is declared as a private household
expenditure, so it is disregarded in the calculation.
15 The Economic Impact of the Universities in the State of Baden-Württemberg 483
Table 15.1 Funding of the core universities (without their medical schools), by origin and use (in euros) in the federal state of Baden-Württemberg (BW)
Gross spending (including VAT) Origin
Basic funding External funding (Drittmittel)
University budget
Additional state
From BW From elsewhere Unknown
Goods and investments In BW
254,250,743 42,761,298 15,433,086 102,051,219 18,840,726
8,860,949 27,795,166 3,055,067 22,883,612 1,326,544
Total 369,626,362 103,705,117 35,447,063 235,439,801 9,824,777
Personnel (civil servants such as professors] In BW 269,759,715 6,308,788 245,121 4,085,617 1,427,669
Unknown 70,209 11,732 15,997 45,914 0
Total 307,986,282 7,884,146 279,535 4,547,629 1,569,857
Personnel (employees) In BW 540,402,225 71,882,158 25,627,738 320,778,087 43,712,054
Unknown 266,917 141,943 37,018 1,023,309 197,664
Total 597,178,804 81,525,826 29,673,708 361,961,145 48,855,292
Contracted Students Total 29,860,603 14,667,178 1,813,971 22,344,918 3,598,241
Source: Design by authors.
Basic nancing assured by the federal state of BW.
Exceptional grants from the federal state (e.g., due to higher numbers of students than expected).
abbreviation for Baden-Württemberg, as agreed at the EU level pursuant to ISO 3166-2.
Exact invoices and residential addresses were not available at the
university level for all suppliers and individuals employed. Hence, unknown expenditure ows are assigned proportionately to expenditures in and outside BW.
484 J. Glückler et al.
Table 15.2 Assumptions and bases of calculating the regionalization of university spending ows
in Baden-Württemberg
Variable Assumed value Source
Employer contributions
Mandatory insurance 19.58% Inquiry at Deutsche Rentenversicherung
including health insurance 7.3% [German pension insurance authority]
including nursing care
including pension
including unemployment
Employee contributions
Mandatory insurance 20.48% Inquiry at Deutsche Rentenversicherung
including health insurance 8.2% [German pension insurance authority]
including nursing care
including pension
including unemployment
Regionalization of expenditures
Students 10% at place of
(Blume & Fromm, 1999)
80% at place of residence
University personnel (includ-
ing civil servants such as
10% at place of
(Blume & Fromm, 1999)
80% at place of residence
Employees in Baden-
90% in Baden-
Median income tax rate 20.7% (Vöhringer, 2012)
VAT rate
Expenditures: goods and
12.0% (universities
without medical
Authorscomputation based on information
from the state universities
12.4% (with medical
Personnel 15.6% Authorscomputation based on typical
shopping carts and mean VAT rates per
sector (Destatis, 2013d; Statistisches
Landesamt Baden-Württemberg, 2013b)
Students 15.9%
Average for Baden-
Consumption ratio
University personnel 79.6% Authorscomputation based on typical
shopping cart (Destatis, 2010)
Students 100%
Inhabitants of Baden-
Source: Design by authors.
15 The Economic Impact of the Universities in the State of Baden-Württemberg 485
basic idea is that demand for particular goods within a region predicates prerequisite
labor output inside or outside a particular region. Demand for prerequisite work
generates further prerequisite work in additional upstream sectors of the economy,
and so on. Eventually, this effect approaches zero asymptotically. The interdepen-
dencies of performance between the individual sectors of the economy are modeled
in input-output calculations as part of macroeconomic accounting. Because input-
output tables for Baden-Württemberg were regularly compiled by the State Statisti-
cal Ofce only until 1993 (Vogt, 2011), we had to compile our own input-output
matrix for Baden-Württemberg. It is modeled on the national matrix of performance
interdependencies and scaled to the regional, sector-specic circumstances, as in the
Flegg location quotient (FLQ) procedure (Flegg, Webber, & Elliott, 1995; Lindberg,
This indirectly triggered rise in production also causes a rise in employment in the
upstream sectors, which leads to additional income. These additional earnings by
employees further increase demand for goods and operate as an induced effect on the
overall regional effect of demand (Pischner & Stäglin, 1976). The Keynesian income
multiplier describes this induced rise of demand for goods by means of the under-
lying circulation of income, that is, by the spending of additional income, and
depends decisively on the willingness of the households to consume. However,
neither the production nor the income multiplier takes account of the effects of the
other multiplier. We therefore use an integrative approach, bringing a Keynesian
element into the regional input-output model by computing a combined multiplier
(Kowalski & Schaffer, 2012; Pischner & Stäglin, 1976). Lastly, the direct effect of
demand at production prices
was multiplied by the foregoing combined multiplier
of indirect and induced effects to determine the overall effect of regional demand at
production prices. We then added in the value-added tax (VAT) for the direct and
induced effects to obtain the overall effect of demand at market prices (Fig. 15.1).
The Regional Economic Impact of Baden-Württembergs
State Universities
Impact on Demand
The impact analysis starts with the gross expenditures of the universities in 2012,
which amounted to 3.049 billion for investments, goods, and personnel and 1.568
billion for consumption by students. These two gures sum to a total gross demand
of 4.6 billion, which constitutes the point of departure for computing the direct,
This procedure is described in the technical appendix.
Assumed shopping carts of university personnel and students and the expenditures of the education
sector served as the basis for ascertaining each share of value-added tax, which was then deducted
from demand at market prices.
486 J. Glückler et al.
Combined Multiplier
Demand Eect
Sum including VAT
Expenditures for Goods and Investments
€1.049 Billion
€595 Million
(VAT: 12% or 12.5%)
€4.617 Billion
€86 Million (Academic Assistants)
a (Income Tax)
b (Propensity to Consume)
Regional Share
Regional Share
Personal Expenditure
€2.000 Billion
Student Expenditure
€1.568 Billion
100%b (Propensity to Consume)
Regional Share
Regional Share
Outside BW
€454 Million
Within BW
€595 Million
€630 Million
(VAT: 15.6%)
€1.229 Billion
(VAT: 15.9%)
b Destatis (2010) EVS 2008 income class (Haushaltsklasse) €2,600–3,600; calculation: private consumption ÷ disposable income = €2,486 ÷ €3,121 = 79.6%; income class < €1,300;
private consumption > disposable income leading to a marginal propensity to consume of 100%.
a Vöhringer (2012).
c Blume and Fromm (1999).
d We calculated dierent rates of VAT for the medical faculties (12.5%) and the core universities excluding these faculties (12%).
e Calculation based on Statistisches Landesamt Baden-Württemberg(2013a, 2013b) and Destatis (2013d).
€673 Million (Social Insurance)
€3.364 Billion
€9.5 Million (Administrative Fees)
Direct Eect
including VAT
Gross Eect
The multiplier is multiplied by the direct eect excluding VAT. Adding the VAT of the direct and indirect eect to this product yields the total eect, including VAT.
Outside BW
€42 Million
Within BW
€695 Million
Outside BW
€216 Million
Within BW
€1.342 Billion
Regional Share
Regional Share
Gross Expenditures
Fig. 15.1 Determination of the overall effect of the demand of state universities in Baden-Württemberg (BW), 2012.
Source: Design by authors.
15 The Economic Impact of the Universities in the State of Baden-Württemberg 487
indirect, and induced effects. The state universities, except for their medical schools,
spent 754 million for goods and investments, of which 470 million had an impact
on demand in Baden-Württemberg (Table 15.1). Gross expenditures for personnel
came to 1.441 billion, of which 451 million had an impact on demand in the
region. The consumption by the 163,427 students enrolled at these universities in
2012 also increased demand for goods and services in Baden-Württemberg. With
average annual receipts of 799.50 per month and student (HIS GmbH, 2010), the
corresponding overall budget for students totaled 1.568 billion. After deducting the
related administrative fees and taking account of the studentssemester postal
addresses, we found that 1.229 billion had an impact on demand directly in
Baden-Württemberg. This sum corresponds to 2.150 billion as the direct effect of
overall demand. In addition, the medical schools spent a total of 295 million on
goods and investments in 2012, of which 125 million had an impact on demand
in Baden-Württemberg. Of the 559 million in total personnel expenditures,
514 million went to persons living in Baden-Württemberg; the remaining 45 million,
to persons living elsewhere. The expenditures of the medical schools accounted
for 304 million of direct effect exerted by demand in Baden-Württemberg. In
brief, the expenditures of the universities (including the medical faculties) came
to 1.049 billion for goods and investments, 2 billion for personnel costs, and
1.568 billion in student expenditures. The resulting regional impact led to a direct
effect of 595 million for goods and investment, 630 million for personnel spending,
and 1.229 billion in student expenditures.
Lastly, the impact that the core universities and their medical schools had on
demand in Baden-Württemberg totaled a direct effect of 2.454 billion. Because of
the interdependencies of prerequisite work in the economic sectors to which this
demand was directed, there were also indirect and induced effects, which were
computed by means of a combined multiplier. We estimate their overall impact on
demand at market prices to have been moderate, about 3.364 billion (Fig. 15.1).
The overall impact of university expenditures on Baden-Württembergs economy
are also ascertainable for four other impact parameters: value creation, income,
employment, and taxes (Fig. 15.2).
Impact on Gross Value Added
The impact on value added is the sum of the personnel expenditures of the state
universities and the increase of gross value creation triggered by university demand
in the remaining sectors. In macroeconomic accounting, gross value creation is the
production value of an economic sector minus that proportion of prerequisite work
which is drawn on by other economic sectors. Consequently, value creation refers
only to the part of the value of goods that is added within the given sector of the
economy (in the region). Because universities in Germany are governed under public
law and thus not allowed to earn prots, the total personnel expenditures of 2
billion in 2012 constitute a direct impact on value creation and, hence, an expression
488 J. Glückler et al.
of the knowledge work performed in the universities (Spehl et al., 2005). Moreover,
the expenditures for goods and investments in the state universities contributed 315
million of gross value creation to the economy of Baden-Württemberg; the con-
sumption expenditures of their personnel and the students, another 886 million. The
direct effect on demand thus led to indirect gross value creation of 1.201 billion.
Additional income induced by direct demand increased gross value creation by 472
million, bringing the overall effect that the state universities had on gross value
creation in Baden-Württemberg to 3.673 billion in 2012 (Table 15.3). This gure
amounted to approximately 1% of gross value creation in Baden-Württemberg that
Impact on Income
The impact on income is the sum of the university personnels direct gross income
and the additional gross income from labor that the demand of the universities gives
rise to in the other sectors of the economy (Rosner & Weimann, 2003). From the
macroeconomic perspective, company prots due to effect on demand ought to be
Gross expenses
Gross expenses in
Increase in
demand through
intermediates in
other sectors
Increase in
demand through
additional income
in other sectors
Increase in value
added through the
demand induced
by additional income
in other sectors
Increase in income
through the
demand induced
by additional income
in other sectors
Increase in
through the
demand induced
by additional income
in other sectors
Increase in value
added through
intermediates in
other sectors
Increase in
income through
intermediates in
other sectors
Increase in
intermediates in
other sectors
Direct Effect
Indirect Effect
Induced Effect
= Sum direct + indirect + induced effects
Total Effect
Gross Effect Personal expenses
of the universities
Personal expenses
of the universities
Gross income of
employees and
Gross income of
employees and
students in
Number of
Number of
employees from
Federal taxes
paid by
universities and
its members
State share of
paid federal
taxes induced
by direct demand
and income effects
State share of
paid federal
taxes induced by
indirect demand
and income effects
State share of
paid federal
taxes generated by
induced demand
and income effects
Gross Value Added Income Taxes
Fig. 15.2 Types and composition of economic impacts on a region.
Source: Design by authors.
15 The Economic Impact of the Universities in the State of Baden-Württemberg 489
included as well (Destatis, 2013b). However, it is difcult, if not impossible, to
quantify these prots reliably, so the income effect is based solely on the university
and regionally induced gross income from dependent labor. The overall effect
comprises three factors. First, the direct incomes are the 1.412 billion of gross
salaries paid by the state universities, and the incomes of their 140,667 students with
semester addresses in Baden-Württemberg (1.350 billion). Second, the demand of
the universities and their members for goods and services in Baden-Württemberg
create or secure further jobs, which generate 506 million of indirect incomes. Third,
these indirect incomes likewise have impacts on demand. Because of the production
interdependencies between the other sectors, they generate an additional 52 billion
of induced incomes. The overall effect of direct, indirect, and induced incomes came
to 3.320 billion in 2012 (Table 15.3).
Impact on Employment
An alternative to representing the impact of income monetarily is to use an equi-
valence computation to determine the impact on the employment stemming from
university demand. The total number of employees at the state universities in 2012
was 40,836 (equivalent to 32,918 full-time employees). The number of these
employees residing in Baden-Württemberg was 36,191 (equivalent to 27,965 full-
time employees). The indirect impact on employment results from the increases in
regional production value that are due to university expenditures and the consump-
tion of university personnel and students. One can ascertain the number of indirectly
created jobs by multiplying sectorial rise in demand with sector-specic labor
coefcients. According to this calculation, the expenditures of the state universities
seeded an additional 19,558 jobs in Baden-Württemberg, inducing extra demand and
thereby creating an additional 7,564 jobs. Conservative computation implies that the
overall effect of impact on employment was at least 63,313 jobs in Baden-
Württemberg alone. This gure comes to approximately 1.2% of all persons who
earn a living in Baden-Württemberg. The computation still does not include the
Table 15.3 Regional economic impacts of Baden-Württembergs state universities, 2012
(in billions of euros)
Type of effect Demand Value-Added Income Employment
Gross 4.617 2.000 3.127 40,836
Direct 2.454 2.000 2.762 36,191 364 (156)
Indirect 630 1.201 506 19,558 399 (174)
Induced 280 472 52 7,564 46 (20)
Overall 3.364 3.673 3.320 63,313 809 (350)
Source: Design by authors.
Refers to the number of jobs.
The parenthetic gures indicate the amount of tax revenue passed on
to the state of Baden-Württemberg.
Corresponds to 32,918 full-time jobs.
490 J. Glückler et al.
many scientists, administrators, and technicians who are gainfully employed at the
other universities and at research facilities outside the universities, most of whom
have purposely settled near the universities. These jobs are especially valuable to
Baden-Württemberg because they are relatively secure when crises hit and fairly
insensitive to cyclical economic downturns.
Impact on Taxes
Baden-Württemberg receives tax revenues from university spending (VAT) and the
incomes it generates (wages and income taxes). These two types of taxes account for
86% of Baden-Württembergs tax revenues (Statistisches Landesamt Baden-
Württemberg, 2013a). Altogether, total revenues of approximately 809 million
within Baden-Württemberg in 2012 are attributable to the demand of the state
universities and their members: approximately 401 million in VAT and 408
million in wage taxes. The other taxes are disregarded in our impact model because
they are relatively unimportant. Since VAT and income taxes are federal taxes, they
are shared between the federation, the states, and the municipalities through com-
pensatory payments between the states and the federation pursuant to the vertical
distribution of taxes (Bundesministerium der Finanzen, 2013). The tax revenues
from Baden-Württemberg before these compensatory payments came to 177 million
in VAT revenues and 173 million in wage tax revenuesa combined sum of
350 million in tax revenues from Baden-Württemberg. Adding in the 9 million
of studentsadministrative fees that likewise accrue to the benet of Baden-
Württemberg brought Baden-Württembergs total receipts to 359 million in 2012.
Expanding the Regional Impact Model to Include Statutory
Health Insurance
Quite beyond the university expenditures, which are usually taken into account,
there are further short-term effects that, in theory at least, would be measurable in
monetary terms if it were not for the scarcity of precise empirical regional data. Their
absence made it impossible for the regional impact model to include measurements
of the indirect and induced effects of demand that reect the company prots arising
from increased production (exact operating surpluses) and the resulting additional
impacts on income. Likewise, we could not take account of the returns on higher
education, which have impacts on the income in a region along with subsequent
impacts on the regional economy (Schubert et al., 2012).
Another unconsidered dimension in impact studies is the effect that mandatory
insurance premiums have on demand for the system of statutory social insurance.
Statutory social insurance in Germany consists of health insurance, nursing-care
15 The Economic Impact of the Universities in the State of Baden-Württemberg 491
insurance, old-age pension insurance, and unemployment insurance. Put simply,
these insurance schemes are cost-covering, pay-as-you-go systems in which the
premiums received from the community of the insured are also paid out yearly as
insurance benets. With old-age, nursing-care, and unemployment insurance, how-
ever, the premiums are hardly ever paid out to the same employees who paid them
in. Yet the benets of statutory health insurance can certainly be modeled regionally
because the premiums paid in the pay-as-you-go system have their impact on
demand in the health-care sector during the period in which they are paid in.
We take only the university employees who have a residence in Baden-
Württemberg and for whom social insurance is mandatory into account when
modeling the regional economic impact of health-insurance premiums. Their insur-
ance premiums, including the employers contributions, amounted to 189 million
in 2012. In keeping with the solidarity principle, these premiums owed into the
federal health fund and to transregional health insurers. Given the solidarity principle
of equal premiums regulated by law and because wage levels differ from one region
in Germany to the next, there are compensatory payments between the states. Baden-
Württemberg, being a net payer, must transfer up to 5% of its collected premiums to
other states (Wasem, Buchner, Lux, Manouguian, & Schillo, 2007), so it follows that
only 95% of the health-insurance premiums paid in Baden-Württemberg are actually
used by insured persons in Baden-Württemberg and thus have an impact on demand
in the health-care sector (Destatis, 2011a). Because part of this demand also goes to
providers outside Baden-Württemberg, there is a need for a regional quota. In 2011
roughly 4.6% of all hospital patients with a residence in Baden-Württemberg were
treated in hospitals beyond its borders (Destatis, 2013c). For lack of available data,
our model rests on the assumption that 95% of all health-care services rendered to
persons employed by the universities also have their impact in Baden-Württemberg.
We therefore had to compute a direct effect of the 171 million impact on demand
in Baden-Württembergs health-care sector. This effect is to be attributed solely to
the expenditures of the state universities for statutory health insurance. This direct
effect triggers a multiplier impact on indirect and induced rises in production and
income in other sectors, adding up to 248 million as an overall effect of demand.
This sum corresponded to a gross value creation of 124 million, an impact on
employmentof 1,753 jobs, and gross income of 36 million. The result was 9million
in VAT revenues and 8 million in income tax revenues, from all of which Baden-
Württemberg received 7 million from the federal government.
Signicance of the State UniversitiesImpact on Baden-
Württembergs Economy
According to the absolute-incidence analysis, the nine state universities secured
more than 63,000 jobs, 3.7 billion (or 1.2% of value creation), and annual tax
revenues of some 350 million in Baden-Württemberg alone in 2012. But how are
492 J. Glückler et al.
these impacts to be assessed? The following section offers two comparative per-
spectives for assessing them: the overall regional economic effect of the impact on
value creation in relation to the state funds used, and a differential incidence analysis
comparing alternative uses of these state resources.
Assessment of the Impact Relative to the Basic Funding Spent
Baden-Württemberg provided its nine state universities with 2.045 billion of basic
funding for 2012. These universities also raised additional funds and attracted the
consumption expenditures of their enrolled students, achieving a total value creation
of 3.673 billion. This impact is 1.8 times the basic funding of the state universities.
Taking into account Baden-Württembergs parallel tax revenues, which result from
the impact that its state universities have on demand and incomes, one nds that this
states actual net use of funds declines to 1.686 billion. The overall effect of the
university impact on value creation in Baden-Württemberg is thereby 2.2 times this
net use of funds.
Differential Incidence
The second possibility for assessing the degree of the impact that Baden-
Württembergs nine state universities have on that states regional economy consists
of comparing alternative uses, that is, of taking the current allocation of basic
funding and comparing it to allocations of those resources to other public uses.
The difference between the absolute incidences of their original use and alternative
uses yields the differential incidence (Stoetzer & Krähmer, 2007) of the state
universities on Baden-Württembergs economy. So far, empirical assessments of
the differential incidence are available only for impact analyses on a small scale
(Assenmacher, Leßmann, & Wehrt, 2004; DIW econ, 2008). Because numerous
conceivable options exist and the analyses of specic alternatives would entail great
effort, the following procedure has proven helpful. It distinguishes between three
fundamental alternative uses of basic funding (DIW econ, 2008): (a) for state
universities, that is, funding them from the state budget, without additional effects
of external funding and student expenditures; (b) for goods and investments only;
and (c) for personnel costs only, without raising additional means.
If the state universities achieve a greater absolute impact than the foregoing
alternatives would, it will indicate that public funding of education and research
has a surplus of short-term impact on the regional economy. This interpretation is
based on the assumptions that alternative public uses of the basic funding (e.g., for
administrative facilities) do not bring in any additional (external) funding and do not
attract stakeholders (students) to move permanently to Baden-Württemberg. The
economic impact of the state universities must therefore be compared with the
multiplier effect of an alternative use by which only the state funds with regional
15 The Economic Impact of the Universities in the State of Baden-Württemberg 493
impact on demand enter the regional circulation of the economy and induce addi-
tional demand through interdependencies of intersectorial prerequisite work. Sce-
narios for Baden-Württembergs economy that result from an increase or decrease of
state funding for the state universities can then be worked out and simultaneously
weighed against the potential effects of reallocating state funding to other areas
(Fig. 15.3).
In 2012 the use of one euro of state funding corresponded to a direct value-
creation impact of 1.80 in Baden-Württemberg. Cutting funds would forfeit value
creation and jobs that alternative uses of public funding could not completely
recoup. The quantitative difference between the impact of the state universities
and that of alternative uses of the funding depends on how those resources are
used. Sole reliance on basic funding of the state universities would result in a value-
creation effect of 1.937 billion (Fig. 15.3, scenario 1). Using state funding exclu-
sively for personnel (Fig. 15.3, scenario 2) would imply greater regional impact on
value creation than using it only to purchase goods (Fig. 15.3, scenario 3) but would
still fall short of the impact that the state universities have. The scenario shows a net
difference of at least 1.173 billion in value creation even with these reallocations of
the previous funding, which did not result in any savings for the state itself.
Billions of Euros
Scenario 2
Using all Basic
Funds for Personnel
Basic Funding Total Eect of
Scenario 1
Eect of Basic
Scenario 3
Using all Basic
Funds for Goods
and Investments
Fig. 15.3 Differential incidence of the impact that Baden-Württembergs state universities have on
gross value added.
Source: Design by authors.
494 J. Glückler et al.
Three Factors Leveraging the Relative Economic Impact
Surplus of Universities
The degree of impact that university spending has on a regional economy depends on
three basic parameters: attraction of additional income due to the migration of
students, acquisition of external funding, and the regions specic production and
consumption proles. The differential incidence analysis has shown that these
factors are precisely what give the state universities greater leverage to strengthen
regional demand than other public facilities have. Table 15.4 shows that the univer-
sities with high shares of both spending and out-of-state students are especially the
ones on Baden-Württembergs periphery. This point underlines the extraregional
attractiveness of the nine state universities, which are associated with a regional ow
of capital out of Baden-Württemberg as well as a ow of capital into it. Unlike the
police, re brigades, and many other public services with a clear regional jurisdic-
tion, the universities have an impact beyond regional borders.
An exceptional case in this respect is Heidelberg University. About 55% of its
students come from outside Baden-Württemberg. In the winter term 20122013,
approximately 17% hailed from other countries; an additional 38%, from other
Table 15.4 Share of expenditures, students, and external funding in Baden-Württemberg (BW)
Expenditures outside
BW (share of all
expenses), in
Number of students from
other states and countries
External funding from
outside BW (share of all
funding), in
Universities in the center of BW
University of
13,235,229 (11%) 2,117 (25%) 25,240,666 (20%)
University of
19,993,965 (9%) 7,370 (28%)* 56,120,312 (23%)
University of
79,911,115 (18%) 6,910 (29%) 156,905,252 (35%)
Universities close to BW borders
University of
39,190,240 (25%) 3,545 (32%) 46,205,997 (29%)
University of
56,904,647 (18%) 8,998 (43%) 90,536,573 (29%)
80,023,267 (22%) 15,846 (55%) 91,069,964 (28%)
Institute of
77,744,543 (20%) 8,546 (37%) 120,469,916 (30%)
University of
36,714,467 (29%) 4,135 (44%) 22,808,000 (17%)
University of
36,206,797 (36%) 6,268 (53%) 14,936,813 (14%)
Source: Design by authors.
*For lack of data, this gure is estimated as being similar to that for Stuttgart and Hohenheim.
15 The Economic Impact of the Universities in the State of Baden-Württemberg 495
federal states within Germany. Some 22% of the universitys expenses went for the
consumption of goods and services and for the salaries of employees outside the
Figure 15.4, which shows the geography of spending for staff, goods, and
investments in 2008, indicates the dispersed character of expenses for material goods
and investments, whereas employees are concentrated largely within the universi-
tiescore region.
Overall, the attractiveness of the universities for students is an initial, important factor
leveraging the impact of the regional multiplier. It was in Baden-Württemberg that 59%
of all the students at the universities of Baden-Württemberg earned their university
entrance qualication. Hence, 41% of all the students in Baden-Württemberg moved
from other states of Germany or another country to Baden-Württemberg in order to
study there. The difference between the students whose semester address was in Baden-
Württemberg and those who earned their university entrance certicate in Baden-
Württemberg yields a net inux of 27% of all persons enrolled at the state universities,
or 44,437 students. On average in Baden-Württemberg, each student has an annual
income of 9,594 (HIS GmbH, 2010), so this net inux of students alone constitutes a
gross effect of 426 million of annual demand.
A second factor leveraging the great impact that the state universities have on the
regional economic of Baden-Württemberg is their acquisition of external funding.
Empirically, for all the states of Germany, there is a linear relationship between the
level of public funding for universities and the level of external funding acquired
competitively. German universities and other institutions of higher learning acquire
on average an additional 0.31 of external funding for each euro received in state
funding. Amounts exceeding the expected values attest to above-average acquisition
of external funding, as in Berlin, Saxony, and Baden-Württemberg (Fig. 15.5). The
external funding that Baden-Württemberg attracted in 2012 (1.137 billion)
surpassed that of the two other geographically large states (North Rhine-Westphalia
and Bavaria). The sum lay about 109 million, or 10%, above the empirically
determined expected value. Baden-Württembergs attraction of external funding
has thus been an abiding strength since 1995 (Destatis, 2013a,2015) and is attrib-
utable mostly to the state universities. In 2012 these universities acquired an
additional 1.005 billion of external funding (based on our own data collection) or
roughly one half of their basic funding. In fact, Table 15.4 shows that most
universities achieve a positive balance between expenditures and funding from
outside Baden-Württemberg.
A third factor of the regional multiplier impact is the specic production and
consumption structure of the regional context. To begin with, the portion of dispos-
able income, which has an impact on demand as a direct effect, varies with the
consumption proles of a regions population. The higher a populations savings
ratio (i.e., the percentage of savings from income not spent on consumption), the less
impact income has on demand. In Baden-Württemberg the populations average
Glückler and König (2012) offer a more detailed geographical overview of the expenses of
Heidelberg University.
496 J. Glückler et al.
Hesse Ba-
12 500
5 000
1 000
5 000 –
1 000 –
500 –
100 –
10 –
faculties and university hospitals
[thousand €]
International boundary
State boundary
District boundary
City of Heidelberg
University region
Remaining metro-
politan region
Authors: J. Glückler, K. König,
R. Panitz, C. Wuttke
© Institut für Länderkunde (IfL)
Personnel expenses
Material expenses
and investments
University expenditure
without the two medical
metropolitan region
50 km250
Fig. 15.4 Geographical distribution of Heidelberg Universitys personnel and expenditures on
material (not counting the faculties of medicine), 2008.
Source: Adapted according to Glückler & König (2012, p. 347). Copyright: Heidelberg University
and IfL. Reprinted with permission.
15 The Economic Impact of the Universities in the State of Baden-Württemberg 497
savings ratio (12.6%) is above average; indeed, it is the second highest savings ratio
in Germany (Destatis, 2010). With a rise in willingness to consume, direct demand
could rise and thereby increase the regional impact of wages and salaries even more.
Another factor inuencing the regional production and consumption structure is the
intersectorial division of labor in the regional production structure. The multiplier of
direct effects of demand rises with the regional prerequisite work ratio. Accordingly,
the greater the intraregional performance interdependencies of the sectors of
the economy, the greater the multiplier impacts of an autonomous rise in
demand. Empirically, the more delimited a region is, the greater the regional ratio
of prerequisite work. If it is just a question of a single universitys local catchment
area, the import ratio is much higher than in a state the size of Baden-Württemberg,
in which virtually the entire economic portfolio of goods production is represented.
Because of the progressive global division of labor in many sectors of the economy,
the continual rise of the export ratio, and the associated increase of trade in
intermediate goods (OECD, 1999,2010), one must assume that the regional prereq-
uisite work ratio is rather likely to decrease in the long term. Be that as it may,
universities can attract students and raise external funding but are themselves largely
unable to inuence these regional production and consumption proles.
Universities are key actors in knowledge-driven economies. They are centers of
knowledge creation and of the training of highly qualied knowledge workers who
shape societies and economies in the long run. Simultaneously, universities are part
of the short-term economic system of regional and national economies because they
0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0
External Funding (Billions of Euros)
Basic Funding (Billions of Euros)
ratio of external
and basic funding
BB Brandenburg
BE Berlin
BW Baden-Würemberg
BY Bavaria
HE Hesse
HB Bremen
HH Hamburg
MV Mecklenburg - Western Pomerania
NI Lower Saxony
NRW North Rhine-Westphalia
RP Rhineland-Palanate
SH Schleswig-Holstein
SL Saarland
SN Saxony
ST Saxony-Anhalt
TH Thuringia
Fig. 15.5 The ratio of basic to external funding, by federal state in Germany, 2012.
Source: Design by authors, data retrieved from Destatis (2015, pp. 1618).
498 J. Glückler et al.
spend money and attract students, employees, and external funding from other
regions. By assessing the short-term, periodic economic impacts that an entire
university landscape has on one of the largest federal economies in Germany, we
have offered an insight into the magnitude of the economic impact of universities on
a large economy. Our approach has several original aspects: (a) a unique database
whose information on the spatial distribution of spending has been offered with
unprecedented precision by university accounting departments, (b) advanced differ-
ential impact analysis, (c) the geographical scale of a large federal state in the
German economy, and (d) the inclusion of statutory health-insurance premiums.
According to our analysis, the nine state universities in Baden-Württemberg
stimulate additional demand in production, value creation, and employment that
almost doubles the initial basic funding that these institutions of higher education
receive from the federal government. For each euro of public funding, the univer-
sities generate an impact on gross value added of at least 1.8 in Baden-Württemberg
alone. At the same time, the regional demand of the universities secures more
than 63,000 jobs in Baden-Württemberg and generates immediate tax revenues of
350 million (359 million including student fees) just for Baden-Württembergs
state administration. The aggregate impact even expandsto 1.9 per euro of basic
fundingif the health-care expenditures are included. Discounting the tax revenues
that Baden-Württemberg earns directly and indirectly by spending the basic funding
within the same year it is received, one nds that the actual net impact of the
universities is 2.3 times greater than the initial net public funding (Fig. 15.6).
0.124 3.797
Eect of
Eect of
Third Party
Eect of
Basic Funding
(Federal State)
Basic Funding
(Federal State)
Billions of Euros
Fig. 15.6 The overall effect of value added in Germanys federal state of Baden-Württemberg,
including statutory health insurance, 2012.
Source: Design by authors.
15 The Economic Impact of the Universities in the State of Baden-Württemberg 499
Because the universities attract many students with purchasing power from other
regions and countries and raise external funding for research and employment, it is
difcult to conceive of alternative uses of public funding that would exceed these
regional economic impacts.
Lastly, a disadvantage of impact analyses is that they capture only existing
supplies with upstream sectors of the economy and, hence, only the static effects
of the current regional economic system and its division of labor (Drucker &
Goldstein, 2007). But the decisive character of university activities lies precisely
in the long-term, dynamic changes in these economic interdependencies (e.g., new
technologies and sectors of the economy) and the conditions of production (e.g.,
increases in productivity). Experience shows that there are scarcely any important
cross-sectorial technologies for which public promotion of research has not been a
pivotal factor. Clearly, assessing only short-term economic impacts greatly under-
estimates the long-term overall economic impacts that universities have on their
region and federal state.
Technical Appendix
To compute the production multiplier, we used the input coefcient matrix from a
computation of Baden-Württembergs input and output matrix. This kind of matrix
is not provided by the state ofces of statistics, so it must be constructed. There are
two ways to construct a regional coefcients matrix: either with data based on
surveys or, as in this chapter, with an estimation. The underlying model for such
estimation can be based on the two matrices of national input coefcients. Because
imports are assigned directly, the domestic input matrix makes for a more realistic
estimate than the technological coefcients matrix does (Lindberg, 2010). The
domestic input matrix was thus the point of departure for the remaining computa-
tions. To reect regional circumstances, the matrix was scaled to a regional level
through the use of local quotients. First, we scaled the national input coefcients
with the help of the location quotient (LQ) (Kowalski & Schaffer, 2012).
where bR
i: Number of persons employed in sector i(regional).
i: Number of persons employed in sector i(national).
P: Total number of persons employed (regional).
P: Total number of persons employed (national).
Each LQ
shows the relative signicance of regional economic sector iin com-
parison to its national counterpart as measured by sectorial employment. If a quotient
lies in the range of LQ
1, one assumes that the sector is sufciently specialized in
the region to satisfy the demand of the other production areas and of the nal
500 J. Glückler et al.
consumers. In this case each regional input coefcient equals the corresponding national
coefcient (aR
ij ¼aN
ij ). With a value of LQ
1, one assumes that regional production
lies below the national average. Consequently, additional prerequisite work must be
imported to satisfy regional demand. The national input coefcients (aN
ij )
ij ¼aN
ij LQið2Þ
must therefore be corrected through use of the LQ
in order to avoid an overestimate
for the region.
This method can be rened by using the cross-industry location quotient (CILQ).
The quotient compares the regional share of the persons employed in the production
sector with the national value and relates it to the sector to be supplied. Thus, both
the size and structure of the production sector and the sector supplied are taken into
account (Kowalski & Schaffer, 2012).
CILQij ¼bR
A special case of adjusting the regional input coefcients that use the CILQ
arises with the diagonals of the matrix (i¼j). The value is 1 by denition. Smith and
Morrison (1974) addressed this problem and proposed that the LQ
rather than the
be used for the cells affected.
Another problem arises because the relative sizes of the regions are not taken into
account. Flegg et al. (1995) tackled this problem and developed a new procedure
based on the CILQ
, which they adjusted in later works by introducing the parameter λ
(Flegg & Tohmo, 2013; Flegg & Webber, 2000).
FLQij ¼bR
where λ¼log21þbR
The FLQ, like the CILQ, includes the producing and supplied sectors of the
economy in the computation. However, by means of the parameter λ(0 λ< 1), the
FLQ also take account of the relative size of a region (as measured by employment).
The value of λapproaches 1 with increasing region size. The exponent δcan be
adjusted to inuence the convexity of the function λ. This choice, however, is based
on empirical work.
Recent studies on Baden-Württemberg use an exponent δat the interval 0.11 δ
0.17 because of the diversied industrial structure (Kowalewksi, 2015). In
comparison to other studies, however, and in the absence of further verication,
this value seems to be too low. For this study we therefore adopted the value of the
empirical studies and used the FLQ formula with δ¼0.3 (Kowalski & Schaffer,
2012; Lindberg, 2010; Schaffer & Siegele, 2008) when generating the regional
input-output table.
15 The Economic Impact of the Universities in the State of Baden-Württemberg 501
Application of FLQ leads simultaneously to the procedure for deriving other
localization quotients.
ij ¼aN
ij FLQij ð7Þ
In the cases of FLQ
1, one has aR
ij ¼aN
ij .
First, the input coefcients at the federal level were scaled down according to
economic sectors to the federal state level with the FLQ procedure through the use of
the gures for employment for which social security is mandatory (Bundesagentur
für Arbeit, 2012). The resulting intersectorial interdependencies table (A) for the
region of Baden-Württemberg covered all 71 economic sectors pursuant to the
industrial classication of 2008 and thus constituted the point of departure for the
subsequent steps of the analysis.
To compute the increase of regional production caused by an increase in demand
in a given sector, one must rst compute the inverse prerequisite work matrix (X):
The prerequisite work matrix (A) was subtracted from the identity matrix (I),
the result was inverted. This step yielded the inverse coefcients of the intersectorial
interdependencies table, also known as Leontief inverses. In the nal step, we
prepared an input-output table based on the regional input coefcients matrix by
including the gross value creation (Destatis, 2011b) of the economic sectors in
Baden-Württemberg. In adjusting gross value creation to the 71 sectors, we assumed
that the relative regional productivity differences of the sectors can be derived from
the relative differences at the federal level. The input-output multiplier computed in
this way describes the indirect effect of rendering prerequisite work that is brought
about by the direct expenditures (ΔY) of the universities and their employees.
To determine this value more precisely, the vector of additional demand (ΔY)is
multiplied by the inverse coefcients of the intersectorial interdependencies table.
We can express this procedure in the following manner, using (8).
Computation of the income multiplier (Keynesian multiplier)
The expansion of intersectorial production leads to an induced effect on income.
The Keynesian multiplier theory describes this effect as a function of the willingness
of households to consume. It states the number of units by which the income of
employees grows because of marginal increases in state expenditures, consumption,
An identity matrix is a square matrix in which the elements a
of the diagonal are 1 and the other
elements 0.
502 J. Glückler et al.
investments, the tax rate, and exports. This multiplier rises with each euro of
additional income that the households spend. The model consists principally of
two elementary equations: the balance equation and the consumption function.
The balance equation denes GDP (Y) in the Keynesian model as the total demand
of the nal consumers:
where Y¼gross domestic product (GDP).
C¼expenditures of the private households.
¼autonomous consumption (demand of the state, or some other entity).
The consumption function
C¼CYðÞ ð12Þ
implies the relationship between GDP and the amount of consumption by private
households. The consumption function also satises
dY <1ð13Þ
This equation results in the following relationship for the marginal consumption
ratio c:
dY ð14Þ
which also lies between 0 and 1.When the marginal consumption ratio is constant,
the GDP (Y) can be expressed as
Y¼cY þN0,Y¼1
In this equation and under these circumstances, the GDP can be explained solely by
the consumption ratio cand autonomous consumption N
Computation of the combined multiplier
The combined multiplier is based on the assumption that the marginal consump-
tion ratio stays constant over the cycles and lies in the range ω
< 1. This value
causes the effect to weaken over the cycles and eventually come to a standstill.
Mathematically, we can draw on equations (8) and (16) to quantify this effect on
demand as follows (Kowalski & Schaffer, 2012; Pischner & Stäglin, 1976; Schaffer
& Siegele, 2008):
where ΔY
: vector of additional nal demand in period 1.
15 The Economic Impact of the Universities in the State of Baden-Württemberg 503
: marginal consumption structure of the private households.
: marginal consumption ratio of the private households.
: primary input coefcients matrix (quadrant III).
: demand trigger in period 0.
As already described, the additionally generated nal demand (ΔY
) is the trigger
for the next round. Accordingly, equation 17 can be generalized as
Lastly, we can derive the combined total effect by including the nal demands
) that were generated in the rounds.
Assenmacher, M., Leßmann, G., & Wehrt, K. (2004). Regionale Entwicklungsimpulse von
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15 The Economic Impact of the Universities in the State of Baden-Württemberg 509
... Die vorliegende Studie nutzt das Instrument der regionalen Multiplikatoranalyse, um ein detailliertes Modell der wirtschaftlichen Wirkung der kulturellen Arbeit der Mannheimer Philharmoniker zu bestimmen und in Hinblick auf die durch die Stadt eingesetzten Fördermittel zu bewerten. Methodische Grundlage der Analyse ist ein regionalökonomisches Wirkungsmodell , das die Autoren zur Bewertung der regionalökonomischen Wirkung von Universitäten als öffentliche Forschungs-und Bildungseinrichtungen weiterentwickelt haben (Glückler et al., 2015(Glückler et al., , 2018Janzen et al., 2022). ...
... Die vorliegende Analyse fußt auf einer detaillierten Primärerhebung durch das Orchester (Videnoff, 2022), ergänzenden Recherchen amtlicher Statistiken und der erprobten Methodik zur Bestimmung regionalökonomischer Wirkungen von Bildungseinrichtungen (Glückler et al., 2015(Glückler et al., , 2018Janzen et al., 2022). Sie genießt daher eine hohe Validität. ...
Technical Report
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Die Mannheimer Philharmoniker leisten einen wichtigen Beitrag zum kulturellen Angebot der Stadt Mannheim, zur musikalischen Bildung von Kindern und Jugendlichen und zur Förderung exzellenten Nachwuchses von Orchestermusiker:innen. Über die Erfüllung ihrer Kultur- und Bildungsfunktion hinaus erhöht die Arbeit des Orchesters auch die wirtschaftliche Güternachfrage, die sich periodisch, in jedem Jahr, positiv auf die städtische Wirtschaft auswirkt. Die jährlichen Gesamtausgaben der Orchestergesellschaft für den laufenden Betrieb und für die Stipendien der Musiker:innen sowie die Konsumausgaben auswärtiger Konzertgäste in Gastronomie, Einzelhandel und Hotellerie in Höhe von 2,063 Mio. Euro erzielten in der Spielzeit 2021/20221 einen Gesamteffekt der Bruttowertschöpfung von 1,473 Mio. Euro allein in der kreisfreien Stadt Mannheim. Diese Gesamtwirkung setzt sich aus zwei Komponenten zusammen: Ausgaben des Orchesters. Das Orchester der Mannheimer Philharmoniker verausgabte 1,598 Mio. Euro an Betriebskosten und 184 Tsd. EUR für Stipendien der Musiker:innen. Davon wurden 1,345 Mio. Euro allein in der Stadt Mannheim nachfragewirksam und führten zu einem Gesamteffekt der Bruttowertschöpfung von insgesamt 1,326 Mio. Euro. Ausgaben der Gäste. Darüber hinaus verausgabten die auswärtigen Konzertgäste für den mit Konzertbesuchen verbundenen Konsum in Gastronomie, Einzelhandel und Hotellerie mindestens weitere 281 Tsd. Euro, die gänzlich in der Stadt Mannheim nachfragewirksam wurden und die Bruttowertschöpfung um weitere 147 Tsd. Euro erhöhten. Die wirtschaftliche Wirkung der Orchestertätigkeit erzeugt nicht nur zusätzlichen Nutzen für den Arbeitsmarkt und die gewerbliche Wirtschaft, sondern generiert zugleich ein höheres Steueraufkommen für die öffentliche Hand. Unter Anrechnung der Gemeindeanteile an den Einkommens- und Umsatzsteuern konnte die Stadt Mannheim aufgrund der Mannheimer Philharmoniker direkte Mehreinnahmen in Höhe von 28 Tsd. Euro verbuchen. Zudem flossen 253 Tsd. Euro an Mieteinnahmen für die Nutzung städtischer Infrastruktur in die Kassen städtischer Betriebe. Die durch das Orchester angestoßenen Steuer- und Mieteinnahmen überkompensieren die kommunale Kulturförderung in Höhe von 50 Tsd. EUR, welche die Stadt im Jahr 2021 aus öffentlichen Mitteln den Philharmonikern bereitstellte, hierbei deutlich. Jeder Euro, den die Stadt Mannheim im Zuge ihrer Kulturförderung dem Orchester bereitstellte, steht somit einer regionalen Wertschöpfung von 29 Euro durch die Mannheimer Philharmoniker gegenüber. Zugleich generiert der Orchesterbetrieb Mehreinnahmen für die Stadt Mannheim und ihre Betriebe in Höhe des 5,6-fachen der von der Stadt eingesetzten Fördermittel.
... In addition to the impact that universities have on the regional milieu, which can usually only be qualified in the long term (Glückler et al., 2018;Schaffer et al., 2018;Stöver, 2020), regional impact studies also report the effects of other outputs (Cox and Taylor, 2006), including the number of publications (Hamm and Kopper, 2016), the position of a university in international rankings (Grass and Künnemann, 2016), the number of patent applications, or the number of university spin-offs (Feller et al., 2002;Huang and Chen, 2017;Vincett, 2010). All these outputs are considered as proxies for the productivity gains from knowledge creation at universities (Drucker and Goldstein, 2007). ...
... This assumption is problematic because the budget used for funding universities could be used for alternative purposes, which in turn would also generate some regional effect (Drucker and Goldstein, 2007;Siegfried et al., 2007;Stoetzer and Krähmer, 2007). Glückler, Panitz, and Wuttke (2018) offer a solution to this problem by using the method of differential analysis. They compare the absolute incidence of universities with the incidences of alternative uses of state funding to determine the real differential impact. ...
Although the positive impact of higher education on regional economies is widely recognized, empirical assessment of the magnitude of its periodic financial impact remains a puzzle. Conventional impact studies have focused on the regional effects of periodic university spending, neglecting the core functions of higher education institutions. To overcome these shortcomings, we develop the concept of a differential regional education premium and implement it in an extended regional multiplier model. The new model integrates university expenditures and education into a compound effect on regional gross value added. Empirically, we find that the education premium increases the traditional effects of state universities in Baden-Württemberg by 68 percent. Generally, the model can be applied to other regions internationally by adapting to regional factors, such as graduate retention, tuition fees, wage levels and occupational qualifications in regional labor markets.
... Erstmalig bewertet diese Studie die Bildungsprämie als zusätzliche regionalökonomische Wirkung, die aus Einkommensanstiegen von Hochschulabsolventen 1 gegenüber Personen mit Sekundärausbildung ohne Hochschulabschluss infolge eines akademischen Bildungsabschlusses resultiert. Über die periodischen, jährlich wirkenden Effekte der universitären Güternachfrage und des Übergangs der Absolventen in den Arbeitsmarkt hinaus sind langfristige Wirkungen von Grundlagenforschung, Innovation und zivilgesellschaftlichen Beiträgen jedoch kaum abschätzbar oder monetär messbar (Goldstein und Renault 2004;Drucker und Goldstein 2007;Glückler et al. 2018). Die nachfolgende Analyse begrenzt sich daher auf die Bemessung der jährlich monetär wirksamen Effekte. ...
... Das Verfahren der regionalen Multiplikatoranalyse dient zur Modellierung der periodischen wirtschaftlichen Effekte, die durch die Erhöhung eines Nachfrageimpulses durch einen Wirtschaftszweig oder wie hier durch die Landesuniversitäten im gesamtwirtschaftlichen Kreislauf entstehen. Der Gesamteffekt ist die Summe von drei Effekten (Glückler et al. 2015 (Pischner und Stäglin 1976;Kowalski et al. 2012;Glückler et al. 2018), dessen Höhe von den Leistungsverflechtungen der Input-Output-Tabelle abhängt. Die Summe von direktem, indirektem und induziertem Effekt bildet den Gesamteffekt der wirtschaftlichen Wirkung des primären Nachfrageimpulses der Universitäten. ...
Technical Report
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Die neun Landesuniversitäten nehmen unter den 80 baden-württembergischen Hochschulen eine herausragende Position ein. Etwa die Hälfte der fast 360.000 Studierenden des Landes war dort im Jahr 2018 immatrikuliert, wobei der Anteil der ausländischen Studierenden mit 58 Prozent noch größer ausfällt. Darüber hinaus warben diese neun Universitäten allein circa 90 Prozent aller Drittmittel der Hochschulen in Baden-Württemberg ein und sicherten somit 47.519 Arbeitsplätze. Jenseits ihrer Aufgaben in Forschung und Lehre geht von den Universitäten eine bedeutende wirtschaftliche Wirkung aus. Durch ihre Güternachfrage an die regionale Wirtschaft und qualifikationsbedingte Mehreinkommen ihrer Absolventen stoßen sie regionalökonomische Multiplikatoreffekte an. Insgesamt addieren sich die Effekte der universitären Güternachfrage (4,7 Mrd. Euro) und der Bildungsprämie (1,4 Mrd. Euro) im Jahr 2018 zu einem Gesamteffekt der Bruttowertschöpfung von etwa 6,1 Mrd. Euro. Jeder Euro, den das Land netto für die Grundfinanzierung der Universitäten investiert, erzeugt eine Wertschöpfung von 4,65 Euro in der regionalen Wirtschaft Baden-Württembergs.
... However, this links back to methodological discussions on how to estimate HEI's effects, e.g. on demand and labour, and to greater controversies on how far universities' benefits can really be captured in the region (e.g. Glückler et al., 2018). It has been pointed out (e.g. by De Meulemeester & Rochat, 1995) that increases in public education expenditures and graduates do not automatically result in upgrading human capital and economic growth. ...
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Fostering innovation and upskilling labour pools have become key goals in national economic development plans and education and training system reforms since the mid-1990s. For their transformation into knowledge-based economies, countries in Southeast Asia have relied on importing transnational higher education providers and have envisioned themselves as international education hubs. As existing research from transnational education and higher education governance studies as well as economic geography and regional studies has not sufficiently addressed this nexus of transnational education and regional economic development, this paper investigates the role of foreign higher education institutions in economic development strategies in Malaysia and Singapore. It explores why and how states have strategically coupled their higher education systems with transnational education. The comparative case analysis draws on empirical evidence from 42 semi-structured interviews. It finds that despite the two states' ostensibly similar ambitions to attract foreign higher education institutions, policies and outcomes differ strongly. Whereas in Malaysia a structural coupling led foreign subsidiaries to provide foreign degrees to domestic students and generate revenue in the private higher education sector, in Singapore foreign subsidiaries have been deployed strategically to upgrade the talent pool and public higher education system of the city-state via functional coupling. Conceptualizing transnational education policies as forms of strategic coupling contributes to understanding their embeddedness within states' broader, historically formed economic development strategies.
... Merlevede et al., 2014), research infrastructures (Giffoni et al., 2018) and universities (Bleaney et al., 1992). Especially in the case of universities, a fundamental actor of RIS, the estimation of regional economic impacts is challenging because it requires extensive accounting for various types of economic flows such as students' expenditures and staff salaries (Hermannsson et al., 2013), university suppliers (Glückler et al., 2018) and renting (Perry & Wiewel, 2005). All these dimensions represent a significant share of the local economy, explaining the policy interest (Harris, 1997;Hermannsson, 2016;Zhang et al., 2017). ...
The paper proposes a policy evaluation approach to estimate the local multiplier effect of (public) R&I expenditures in the context of regional innovation systems (RIS). Starting from input-output tables and recent improvements in local multipliers, the proposed approach tracks all economic flows generated by the initial public R&I expenditures, distinguishing direct impact and subsequent effects on the supply chain, consumption, fiscal flows and interregional spillovers. The main interest of this approach is the focus on the 'certain' returns occurring within a RIS, irrespective of their 'uncertain' innovative outcomes, i.e. this approach tracks the economic flows of R&I expenditures even if innovation-oriented activities should fail to provide the expected benefits for regional productivity. The case of Innoviris, the Brussels regional R&I agency, is discussed to validate this approach unpacking the economic flows in a context of strong interregional linkages showing the spatial distribution of economic returns generated by R&I-oriented public expenditures. ARTICLE HISTORY
... Merlevede et al., 2014), research infrastructures (Giffoni et al., 2018) and universities (Bleaney et al., 1992). Especially in the case of universities, a fundamental actor of RIS, the estimation of regional economic impacts is challenging because it requires extensive accounting for various types of economic flows such as students' expenditures and staff salaries (Hermannsson et al., 2013), university suppliers (Glückler et al., 2018) and renting (Perry & Wiewel, 2005). All these dimensions represent a significant share of the local economy, explaining the policy interest (Harris, 1997;Hermannsson, 2016;Zhang et al., 2017). ...
The paper proposes a policy evaluation approach to estimate the local multiplier effect of (public) R&I expenditures in the context of regional innovation systems (RIS). Starting from input-output tables and recent improvements in local multipliers, the proposed approach tracks all economic flows generated by the initial public R&I expenditures, distinguishing direct impact and subsequent effects on the supply chain, consumption, fiscal flows and inter-regional spillovers. The main interest of this approach is the focus on the ‘certain’ returns occurring within a RIS, irrespective of their ‘uncertain’ innovative outcomes, i.e. this approach tracks the economic flows of R&I expenditures even if innovation-oriented activities should fail to provide the expected benefits for regional productivity. The case of Innoviris, the Brussels regional R&I agency, is discussed to validate this approach unpacking the economic flows in a context of strong interregional linkages showing the spatial distribution of economic returns generated by R&I-oriented public expenditures.
... The immobile conferences might thus have needed more time than the mobile conferences for gaining a larger geographical reach, but the biannual academic conferences in Santa Cruz do Sul enabled, just as outlined by Latour's (1987) notion of cycles of mobilization in scientific centres of calculation, the creation of cumulative processes of mobility and networking among postgraduate students and academics that have contributed to the emergence of a well-known centre of regional development research at the University of Santa Cruz do Sul. Based on existing empirical findings about important regional economic impacts resulting from a university's personnel and material expenses (Glückler et al., 2018:497) and from C.F. Momm and H. Jöns Geoforum xxx (xxxx) xxx-xxx conferences and other business tourism events (Bathelt et al., 2014:10), we suggest that the SIDR meetings, because they have been hosted every second year in the same place, not only impacted on the increase of postgraduate students, academic staff, and scientific expertise in SIDR's host university but also brought considerable economic benefits to the host city and the state of Rio Grande do Sul (Motoyama, 1985(Motoyama, , 2004Cunha, 2007;Sá et al., 2015). C.F. Momm and H. Jöns Geoforum xxx (xxxx) xxx-xxx ...
This article advances research on the geographies of science, higher education, and knowledge production by analysing how the material, social, and intellectual geographies of academic conferences have shaped capacity-building in Brazil. Drawing upon debates about conferences as temporary and cyclical knowledge clusters, mobilities of knowledge, and triadic thought, we present the first longitudinal and comparative geographical analysis of academic conferences by examining Brazil's two major biannual conferences on urban and regional development and planning—the mobile ENANPUR events and the stationary SIDR meetings—over a ten-year period. Our multi-dimensional and multi-scalar comparative analysis of ten events with more than 1600 conference papers and 2600 contributing authors reveals that in the context of an expanding Brazilian higher education system, both conferences acquired national reach of paper authors and study sites but with persisting east-west and south-north disparities. We discuss how ENANPUR and SIDR contributed to national capacity-building through 'decentralized concentration' of knowledge production and exchange, mitigating regional disparities via the decentralization of epistemic communities but reinforcing regional imbalances through the concentration of resources in conference locations, coastal states, and the two southern regions. We argue that conferences are an important tool for urban and regional development because they put places and people 'on the map' of epistemic communities and policy agendas, thereby helping to provide expertise for local and regional problem-solving.
Interest in higher education institutions (HEIs) as instruments for development has increased in recent years. The main objective of this chapter is to address the main challenges HEIs face in the 21st century as key actors for regional development, emphasising their entrepreneurial dimension. The pressures exerted on HEIs to become more effective, efficient, and autonomous require a reflection regarding the present and future of higher education. Through a detailed analysis and discussion of the relevant literature, this chapter contributes to a better understanding of the role of HEIs, especially given its relationship with society and the need for a more effective contribution to socioeconomic development.
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This innovative book addresses the leadership and management challenges of maximising the contribution of universities to civil society both locally and globally. It does this by developing a model of the civic university as an academic concept, drawing out practical lessons for university management on how to embed civic engagement in the heartland of the university. To this end, the contributors compare experiences and reports on a developmental process in eight institutions: University College London and Newcastle University in the UK, Amsterdam and Groningen Universities in the Netherlands, Aalto and Tampere Universities in Finland and Trinity College Dublin and Dublin Institute of Technology in Ireland. It will be of interest to academics of politics, public policy and management studies, as well as having relevance to policymakers in the field. © John Goddard, Ellen Hazelkorn, Louise Kempton and Paul Vallance 2016. All rights reserved.
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Philanthropy is playing an increasingly important role in social and economic development at the level of regions. While philanthropy research has been focusing primarily on the sectorial analysis of specific types of actors such as individual generosity, patronage, foundations, service clubs or corporate philanthropy etc., this paper takes an explicit geographical perspective on financial philanthropy in the region of Heilbronn-Franconia in Southern Germany. The analysis draws on a multi-method explorative regional case study to develop an understanding of the specificity of benevolent giving by for-profit enterprises vis-à-vis foundations and other types of non-profit organizations. In addition, the paper proposes the concept of the philanthropic field to explore the potential interplay and successful events of cooperation between for-profit and not-for-profit organizations. A comparison of the financial donations between corporations and foundations demonstrates the potential complementarity between these groups of actors as well as the potential spaces of collaboration between them to the benefit of regional development.
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Zusammenfassung Die Bewertung der wirtschaftlichen Bedeutung von Universitäten steht zunehmend im politischen Interesse, wenn es um die Rechtfertigung des öffentlichen Mitteleinsatzes für Forschung und Bildung geht. Während regionale Wirkungsanalysen bisher meist auf der lokalen Ebene und für einzelne Einrichtungen durchgeführt wurden, bewertet dieser Beitrag erstmalig den monetären Effekt einer ganzen Hochschullandschaft auf die Wertschöpfung und den Arbeitsmarkt eines großen Flächenlandes in Deutschland. Einige der methodischen Schwächen der Wirkungsanalyse werden hierbei verbessert. Aufgrund einer erweiterten Multiplikatoranalyse, die sowohl produktions- als auch einkommensseitige Effekte integriert, einer differenziellen Analyse der Überschusswirkung von Universitäten gegenüber alternativen Verwendungen der staatlichen Grundmittel sowie der Modellerweiterung um Ausgabenströme im System der Sozialversicherungen trägt diese Untersuchung zu einer Weiterentwicklung der ökonomischen Wirkungsanalyse von Bildungseinrichtungen auf Länderebene bei. Mithilfe einer präzise regionalisierten Primärerhebung der Ausgaben aller neun Landesuniversitäten in Baden-Württemberg zeigt die Analyse, dass die Universitäten in ihrer Gesamtwirkung einen Beitrag zu Wertschöpfung und Beschäftigung leisten, der die eingesetzten Mittel der Grundfinanzierung des Landes nahezu verdoppelt. Die differenzielle Analyse ergibt ferner, dass alternative Verwendungen der Grundmittel kaum vergleichbare Wirkungen erzielen. Schließlich diskutiert der Beitrag wesentliche Faktoren, die die Hebelwirkung universitärer Ausgaben bestimmen.
The triple helixof university-industry-government interactions is a universal model for the development of the knowledge-based society, through innovation and entrepreneurship. It draws from the innovative practice of Massachusetts Institute of Technology (MIT) with industry and government in inventing a regional renewal strategy in early 20th-century New England. Parallel experiences were identified in “Silicon Valley,” where Stanford University works together with industry and government. Triple helix is identified as the secret of such innovative regions. It may also be found in statist or laissez-faire societies, globally. The triple helix focuses on “innovation in innovation” and the dynamic to foster an innovation ecosystem, through various hybrid organizations, such as technology transfer offices, venture capital firms, incubators, accelerators, and science parks. This second edition develops the practical and policy implications of the triple helix model with case studies exemplifying the meta-theory, including: • how to make an innovative region through the triple helix approach; • balancing development and sustainability by “triple helix twins”; • triple helix matrix to analyze regional innovation globally; and • case studies on the Stanford’s StartX accelerator; the Ashland, Oregon Theater Arts Clusters; and Linyi regional innovation in China. The Triple Helix as a universal innovation model can assist students, researchers, managers, entrepreneurs, and policymakers to understand the roles of university, industry, and government in forming and developing “an innovative region,” which has self-renewal and sustainable innovative capacity.
Universities are being seen as key urban institutions by researchers and policy makers around the world. They are global players with significant local direct and indirect impacts - on employment, the built environment, business innovation and the wider society. The University and the City explores these impacts and in the process seeks to expose the extent to which universities are just in the city, or part of the city and actively contributing to its development. The precise expression of the emerging relationship between universities and cities is highly contingent on national and local circumstances. The book is therefore grounded in original research into the experience of the UK and selected English provincial cities, with a focus on the role of universities in addressing the challenges of environmental sustainability, health and cultural development. These case studies are set in the context of reviews of the international evidence on the links between universities and the urban economy, their role in 'place making' and in the local community. The book reveals the need to build a stronger bridge between policy and practice in the fields of urban development and higher education underpinned by sound theory if the full potential of universities as urban institutions is to be realised. Those working in the field of development therefore need to acquire a better understanding of universities and those in higher education of urban development. The insights from both sides contained in The University and the City provide a platform on which to build well founded university and city partnerships across the world.