Universities are well known to play a crucial role in the local economy.  For instance, the University of Michigan’s Jason Owen Smith argues in his latest book Research Universities and the Public Good, high-quality universities offer three unique components to a community:

• They are sources of knowledge and talent who converge in great diversity and scale on every university campus.
• They are community anchors who act as contributing institutional citizens for a region, with the longevity and stability of universities highly valuable.
• They are connecting hubs that funnel people and ideas from the local community and then back out into the wider world in a similar way to hub airports do.

So it’s perhaps no surprise that research from the University of Illinois Urbana-Champaign suggests that they also play a crucial role in providing resilience to the local economy.

Withstanding shocks

The study finds that local economics with a regional public university in tend to be more resilient, which results in fewer job losses, less of a reduction in incomes, and even less outward migration after a period of economic turmoil.

“There’s a lot of interest in what makes local economies resilient to adverse conditions, and what we found was that university towns tended to weather economic storms better than others—and they’re able to do so in part because the universities themselves are economically resilient,” the researchers say.

The researchers focused on so-called “normal schools”, which were schools established in the 19th century to educate elementary school teachers.  These schools often grew into regional public universities.

“What we’re able to do in this paper is compare communities that were granted universities instead of other state-funded facilities. Our assumption was that the asylum counties are a good counterfactual for what would have happened in the normal-school counties had the normal schools not turned into regional universities, as the initial selection criteria for both were very similar,” the researchers explain.

The analysis found that during periods of recent decline in manufacturing, the universities were able to provide high degrees of resilience to the various negative effects of this decline.  In essence, for each manufacturing lost in non-university towns, university towns didn’t suffer such a fate.

“We also see nearly full resilience when looking at population and earnings,” the authors say. “Further analysis shows universities also enable resilience to the mining employment decline of the 1980s, and to the general ups and downs of the business cycle.”

Consistent funding

The authors suggest that this resilience is in large part due to the consistent funding the universities receive from the state, which helps to buffer any economic downturns.

“Their expenditures are resilient and that could be because they’re getting relatively stable allocations from the state government, or that student demand is more resilient at these types of universities than at other private universities,” the authors continue.

What’s more, the presence of the universities also meant that there was a higher proportion of the local population with a degree, which may also play a role in the resilience of the local community.

“We’re more cautious here, but the results suggest that this higher education level in the university counties also might explain some portion of the resilience,” the researchers explain. “And that can be because college-educated people themselves are more resilient to economic shocks than their less-educated peers. It may be easier for the college-educated to switch industries if one industry goes into decline.”

The researchers believe that their work is valuable because Owen Smith et al are among many to highlight the value of research-intensive universities, there is generally less attention given to the virtues of public universities.  Given the findings, the team hope that local authorities will be influenced when it comes to deciding whether to close or reduce the number of programs at public universities.

“While their role as anchor institutions in local communities is often cited by their proponents, there’s been very little causal evidence until now that demonstrates the positive economic impact these less research-intensive universities have on their local economies,” the authors conclude.

“If we don’t fund these regional universities, their local economies will be more vulnerable to adverse economic shocks. They have so much influence on their surrounding communities.”