Bringing together Atlanta-area colleges and universities.

Methodology for this impact study

What was studied
Input-output table
Data sources
Multiplier effect

What was studied
Since its development in the late 1930s, input-output analysis has served as a primary tool for tracing the economic linkages between various economic sectors and whole communities. This report is derived from a study that utilized input-output analysis to determine direct, indirect and induced industry output and employment as a result of Atlanta-area college and university expenditures, staff and student expenditures, and tourism activity. To show linkages between higher education and other economic sectors, analytical estimates were broken down by major industry group and shown in relationship to total industry output and employment.

For purposes of the study, the “Atlanta region” or “Atlanta area” includes the Athens-Clarke County, GA Metropolitan Statistical Area, the Atlanta-Sandy Springs-Marietta, GA Metropolitan Statistical Area, and the Gainesville, GA Metropolitan Statistical Area.

A total of 49 degree-granting, accredited higher education institutions located in the three MSAs are included in this study, including 21 public and 28 private (for-profit and non-profit) institutions. Of these, two institutions are located in the Athens-Clarke County MSA, 44 are in the Atlanta-Sandy Springs-Marietta MSA, and three are in the Gainesville MSA.

ARCHE’s 19 member colleges and universities are estimated to represent 90 percent of the total operating expenditures of all institutions of higher education included in this analysis, and nearly 95 percent of the total capital expenditures.

All information in this report related to annual spending by institutions, employees, students and visitors, or related to tax revenues, is based on FY 2003 data and is expressed in FY 2005 dollars using the Consumer Price Index (CPI) as a general price inflator. All information related to capital expenditures by institutions reflects an average annual impact based on the period FY 1999 – FY 2003 and is expressed in FY 2005 dollars using the CPI as a general price inflator.

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Input-output table
To estimate the impact of an institution on the state economy and to understand the linkages or dollar flows between higher education activity and its supplying sectors, an input-output (IO) table was developed by updating a 96-sector 1997 benchmark U.S. IO table. The table was updated for 2003 prices and employment based on various national and local sources including U.S. Census Bureau, Bureau of Labor Statistics and Bureau of Economic Analysis data. To regionalize the table and estimate state and local activity, a standard location quotient (LQ) update method was applied to the U.S. table where individual values from the IO technical coefficient, or “A” matrix,” are proportionately adjusted based on state or local employment LQs derived from the 2003 U.S. County Business Patterns. LQs are based on the ratio of the percent of persons employed in each industry in Georgia to the percent employed in each industry nationally.

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Data sources
For purposes of this study, institutional information was collected by ARCHE from its member colleges and universities, including: audited financial statements, expenditures by vendor and vendors’ location of operation, all capital-related expenditures for the period FY 1999 – FY 2003, employees and their location of residence, privately funded gifts-grants-contracts and the location of the funding source, alumni and their location of residence, and information cited below regarding visitors. Non-ARCHE institutions located in the Atlanta area also provided capital-related expenditure data for the period FY 1999 – FY 2003. Data from the federal Integrated Postsecondary Education Data System was utilized for ARCHE and non-ARCHE institutions regarding enrollments and staffing levels and for non-ARCHE institutions regarding annual finance information.

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Student expenditures were based on college living and miscellaneous expense budgets as reported by the institutions to the College Board. Specifically designated expenditures for room and board, transportation and books were assigned to their respective industry clusters, while miscellaneous expenses were allocated across industry groups based on Consumer Expenditure Survey-based purchase patterns of persons between the ages of 18-24. Corresponding expenditures from the college’s auxiliary operations, such as room and board and food services, were subtracted from the student’s total expenditures to avoid double counting.

Visitor expenditures were based on visitor person-days as reported by ARCHE institutions. The estimated person-days were categorized into four basic types: day and night leisure visits such as attendance at sporting or cultural events, and day and overnight business such as attendance at conferences. Average daily expenditures for each category were derived from visitor and tourist budgets computed by the Georgia Department of Tourism, the Travel Industry of America, other states’ departments of tourism, and previous economic impact studies conducted by Human Capital Research Corporation.

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Multiplier effect
In considering the impact or multiplier effect under this technique, it is important to recognize that this method, like all non-survey or partial survey-based IO tables, represent an estimate of actual economic activity. Because of individual supplier arrangements between individual business establishments and unique consumer preferences, it is impossible to state precisely the extent to which all transactions actually occurred within state boundaries. The LQ method assumes that a state is relatively self-sufficient in meeting statewide demand for inputs that have at least the national percent employed in a particular industry. For this analysis, the resultant income multiplier for higher education in the Atlanta region on Georgia is estimated at 2.03.

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“Colleges and universities generate an economic chain reaction that creates jobs and keeps our economy strong.”

— Mike Garrett, Georgia Power President and CEO.

More stories of higher ed impact in the full Enriching Georgia report (.pdf 1MB)


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