Economic Impacts on the Coastal Bend Economy
In this chapter, we estimate the following economic impacts of UHV: 1) the university spending impact (including operations, research and construction spending), 2) the visitor spending impact, 3) the student spending impact, and 4) the alumni impact, measuring the income added in the region as former students expand the regional economy’s stock of human capital.
When exploring each of these economic impacts, we consider the following hypothetical question:
How would economic activity change in the Coastal Bend if UHV increased its student FTEs from 3,259 in FY 2018-19 to 6,000 in FY 2028-29?
Each of the economic impacts should be interpreted according to this hypothetical question. Another way to think about the question is to realize that we measure net impacts, not gross impacts. Gross impacts represent an upper-bound estimate in terms of capturing all activity stemming from the university; however, net impacts reflect a truer measure of economic impact since they demonstrate what would not have existed in the regional economy if not for the university.
Economic impact analysis use different types of impacts to estimate the results. The impact focused on in this study assesses the change in income. This measure is similar to the commonly used gross regional product (GRP). Income may be further broken out into the labor income impact, also known as earnings, which assesses the change in employee compensation; and the non-labor income impact, which assesses the change in business profits. Together, labor income and non-labor income sum to total income.
Another way to state the impact is in terms of jobs, a measure of the number of full- and part-time jobs that would be required to support the change in income. Finally, a frequently used measure is the sales impact, which comprises the change in business sales revenue in the economy as a result of increased economic activity. It is important to bear in mind, however, that much of this sales revenue leaves the regional economy through intermediary transactions and costs.9
9 See Appendix 4 for an example of the intermediary costs included in the sales impact but not in the income impact.
All of these measures—added labor and non-labor income, total income, jobs, and sales—are used to estimate the economic impact results presented in this chapter. The analysis breaks out the impact measures into different components, each based on the economic effect that caused the impact. The following is a list of each type of effect presented in this analysis:
- The initial effect is the exogenous shock to the economy caused by the initial spending of money, whether to pay for salaries and wages, purchase goods or services, or cover operating expenses.
- The initial round of spending creates more spending in the economy, resulting in what is commonly known as the multiplier effect. The multiplier effect comprises the additional activity that occurs across all industries in the economy and may be further decomposed into the following three types of effects:
- The direct effect refers to the additional economic activity that occurs as the industries affected by the initial effect spend money to purchase goods and services from their supply chain industries.
- The indirect effect occurs as the supply chain of the initial industries creates even more activity in the economy through their own inter-industry spending.
- The induced effect refers to the economic activity created by the household sector as the businesses affected by the initial, direct and indirect effects raise salaries or hire more people.
Net impacts reflect a truer measure of economic impact since they demonstrate what would not have existed in the regional economy if not for the university.
The terminology used to describe the economic effects listed above differs slightly from that of other commonly used input-output models, such as IMPLAN. For example, the initial effect in this study is called the “direct effect” by IMPLAN, as shown in the table below. Further, the term “indirect effect” as used by IMPLAN refers to the combined direct and indirect effects defined in this study. To avoid confusion, readers are encouraged to interpret the results presented in this chapter in the context of the terms and definitions listed above. Note that, regardless of the effects used to decompose the results, the total impact measures are analogous.
Multiplier effects in this analysis are derived using Emsi’s Multi-Regional Social Accounting Matrix (MR-SAM) input-output model that captures the interconnection of industries, government and households in the region. The Emsi MR-SAM contains approximately 1,000 industry sectors at the highest level of detail avail- able in the North American Industry Classification System (NAICS) and supplies the industry-specific multipliers required to determine the impacts associated with increased activity within a given economy. The multi-regional capacity of the MR-SAM allows impacts to be measured in the region and state simultaneously, taking into account UHV’s activity in each area, as well as each area’s economic characteristics. In this analysis, impacts on the region include impacts from the university’s regional activity, as well as the indirect and induced multiplier effects that reach the region from the university’s activity in the rest of the state. For more information on the Emsi MR-SAM model and its data sources, see Appendix 5.
The methodology outlined for each impact below is presented using the FY 2018-19 data from UHV; however, the same methodology is used for calculating the impact of serving 6,000 FTEs in FY 2028-29.