Universities vital for dynamic economies

With Kirk Heffelmire

As we’ve argued before (see here and here), there is a strong correlation between the concentration of top-ranked universities in a country and that country’s competitiveness. Countries with more of the world’s best universities are more competitive, meaning they are more likely to be economically successful in the future.

As new data on world universities and competitiveness are made available, we like to keep our chart updated.  As you can see, about 44 percent of the variation in economic competitiveness between countries is explained by the number of top 300 universities per 10 million of population in that country.  As correlations go, a 44% is a pretty strong one!

Switzerland enjoys the highest concentration of world-class universities and is also the world’s most competitive nation.  The U.S. is more competitive than its top-university density would predict.  And my home country of Spain is just about where you would expect.

 

The 2016 Academic Ranking of World Universities by the ShanghaiRanking Consultancy was just published last week. The ranking considers six indicators of research productivity and prestige. Competitiveness data is drawn from the World Economic Forum’s 12 pillar model–which include basics such as institutions, health, and education, as well as market efficiencies and business sophistication.

Correlation of course doesn’t imply causation.  But there are other independent studies that indicate that the presence of universities in a region does in fact lead to economic vitality.  Recent research by Anna Valero and John Van Reenen at the National Bureau of Economic Research, in fact, gives support that universities have a significant impact in the economic growth of their immediate and neighboring regions.

Very importantly, this impact goes well beyond direct spending and employment created.  The key driver is the increase and human capital and innovation.  The research found that increasing the number of universities in a region was positively associated with future growth in GDP per capita even after controlling for region characteristics and university expenditures. Specifically, the research predicts 4 percent higher future GDP per capita after doubling the number of universities.