Appendix 2: Glossary of Terms
Alternative education A “with” and “without” measure of the percent of students who would still be able to avail themselves of education if the university under analysis did not exist. An estimate of 10%, for example, means that 10% of students do not depend directly on the existence of the university in order to obtain their education.
Alternative use of funds A measure of how monies that are currently used to fund the university might otherwise have been used if the university did not exist.
Attrition rate Rate at which students leave the workforce due to out-migration, unemployment, retirement, or death.
Counterfactual scenario What would have happened if a given event had not occurred. In the case of this economic impact study, the counterfactual scenario is a scenario where the university did not exist.
Credit hour equivalent Credit hour equivalent, or CHE, is defined as 15 contact hours of education if on a semester system, and 10 contact hours if on a quarter system. In general, it requires 450 contact hours to complete one full-time equivalent, or FTE.
Demand Relationship between the market price of education and the volume of education demanded (expressed in terms of enrollment). The law of the downward-sloping demand curve is related to the fact that enrollment increases only if the price (tuition and fees) is lowered, or conversely, enrollment decreases if price increases.
Earnings (labor income) Income that is received as a result of labor; i.e., wages.
Economics Study of the allocation of scarce resources among alternative and competing ends. Economics is not normative (what ought to be done), but positive (describes what is, or how people are likely to behave in response to economic changes).
Gross regional product Measure of the final value of all goods and services produced in a region after netting out the cost of goods used in production. Alternatively, gross regional product (GRP) equals the combined incomes of all factors of production; i.e., labor, land and capital. These include wages, salaries, proprietors’ incomes, profits, rents, and other. Gross regional product is also sometimes called value added or added income.
Initial effect Income generated by the initial injection of monies into the economy through the payroll of the university and the higher earnings of its students.
Input-output analysis Relationship between a given set of demands for final goods and services and the implied amounts of manufactured inputs, raw materials, and labor that this requires. When educational institutions pay wages and salaries and spend money for supplies in the region, they also generate earnings in all sectors of the economy, thereby increasing the demand for goods and services and jobs. Moreover, as students enter or rejoin the workforce with higher skills, they earn higher salaries and wages. In turn, this generates more consumption and spending in other sectors of the economy.
Multiplier effect Additional income created in the economy as the university and its students spend money in the region. It consists of the income created by the supply chain of the industries initially affected by the spending of the university and its students (i.e., the direct effect), income created by the supply chain of the initial supply chain (i.e., the indirect effect), and the income created by the increased spending of the household sector (i.e., the induced effect).
NAICS The North American Industry Classification System (NAICS) classifies North American business establishment in order to better collect, analyze, and publish statistical data related to the business economy. Non-labor income Income received from investments, such as rent, interest, and dividends.
Payback period = cost of investment/net return per period