The impact of out-of-state students and federal research grants in higher education on the Tennessee economy.

Abstract

This study analyzes the economic impact of two significant non-state sources of direct expenditures associated with the public higher education system in Tennessee: nonresident students and Federally funded research. Specifically, the study examines direct expenditures associated with these sources at six Tennessee Board of Regents institutions and five University of Tennessee System institutions.

While several studies have addressed the significant and varied economic impacts of higher education in Tennessee, (Murray and Mayes 1994; Pascarella and Terenzini 1996; Ukpolo and Dernberg 1998; and, THEC 2000) none of these studies has addressed either of the issues explored in this study.

This study uses input-output methodology to separately assess the total economic impact of each source of funds. Results of the study indicate that the direct and total economic impact of each category of expenditure is quite large. Further, given the estimated total economic impact of nonresident students and the state subsidy cost to educate them, estimated benefit-cost ratios demonstrate that the economic benefit of nonresident student education in Tennessee exceeds its short-term cost.

Nonresident student expenditures for the 2000--01 academic year, and Federal grant and contract revenues for the 1999--00 academic year are examined by this study. Taken separately, the total economic impact on Tennessee's economy of each source of funds considered by this study exceeds {dollar}400 million annually during the relevant study period.

Readers interested in economic impact issues in higher education will find the results of this study of particular interest, especially as they relate to higher education in Tennessee. This study and its methodology can also serve as a model for similar research in other states. Additionally, several potential areas for future research along these lines are highlighted and discussed in Chapter 5.

Finally, this study also explores several key policy implications arising from the findings of this study as they relate to current higher education financing issues in Tennessee. Additionally, it explores some simple, straightforward uses of this study and its results for the teaching of economics.