Universities' effects on regional GDP and unemployment: The case of Germany

There is a large consensus that higher education institutions exert notable effects on their regional environment. So far, however, much of the related evidence is based on case studies. Few findings are available on a more generalizable level. To bridge this gap, our study uses spatial panel-data models to identify the impacts of higher education institution (HEI) activities on GDP per capita and unemployment in Germany. Beyond demand-side effects, we seek to identify the, arguably more important, indirect long-term effects of knowledge generation. Accounting for regional spillovers, we find that on average HEI contributed e8,300 to regional GDP per capita in the period 2000 to 2011. Furthermore, we find that they help to significantly reduce unemployment rates in the long run.