Rural Regions Benefit Particularly from Private Universities
ResearchZEW Study on the Impact of Private University Foundations on the Local Economy
Private university campuses can measurably strengthen economic development in Germany. A recent analysis by ZEW Mannheim shows that the foundation of a private campus boosts local economic activity, with an increase in regional gross domestic product of around 1.5 to 2.1 percent on average. However, the effects vary from region to region and only become apparent over a longer period. Campus foundations benefit particularly regions that are more rural, whereas no increase in economic activity is evident in urban regions.
“On the one hand, our findings reinforce the case for private universities to receive regional recognition and support, as they can become relevant for regional development in the long term,” explains Dr. Bastian Krieger, researcher in ZEW’s Research Unit “Economics of Innovation and Industrial Dynamics” and head of the junior research group “Co-Creation”. Linus Strecke, researcher in the same unit, adds: “On the other hand, the findings also show that private university campuses can be leveraged for regional policy purposes, although their potential is concentrated primarily in more rural and intermediate regions.”
Stronger effects outside metropolitan regions
While there are no measurable effects in urban areas, rural and intermediate regions benefit from the foundation of a new university campus, with gross domestic product growth of up to seven percent. Private universities therefore have the potential to act as economic catalysts in structurally weaker regions and to play a significant role in regional policy strategies.
Long-term effect and local ties
The positive effects do not materialise in the short term but build up over many years. It is only after more than a decade that they are statistically significant. This suggests that private universities contribute to economic development in the long term, for example through human capital formation, business relationships or their regional leadership role. At the same time, the effects remain local. No comparable effects can be seen in neighbouring regions; the economic gains are concentrated in the host regions of the private campuses.
About the methodology
The study combines comprehensive data on private university campus foundations in Germany in the period 1985 to 2020 with a satellite-based indicator of local economic activity for German postal code regions. Methodologically, a staggered difference-in-differences design is used, which compares the economic development between regions where a private university campus is founded and structurally similar regions where no campus has yet been founded. It is thus possible to identify the causal effects of campus foundations for the economic development in the respective region.
The study was supported by the Federal Ministry of Research, Technology and Space in the context of the funding line “Research on non-governmental higher education universities” (funding codes: 16NISTA04A and 16NISTA04B).
