Monday, August 07, 2006



There was a new study put out just last week about the economic impact of UNCG on the Piedmont Triad area of North Carolina. When I read the little blurb found in the Winston-Salem journal on the study I found at least one problem. Would anybody like to point them out.

Here's the story on the Triad Business Journal and UNCG's press release.

A recent study shows that the University generates economic activity totaling $588 million for the eight-county Piedmont Triad region, and $541 million in Guilford County. These figures include additional generated household income of $171 million in the Triad and $124 million in Guilford County.

The campus also generates 6,439 additional jobs in Guilford County and 7,792 jobs in the Triad, which includes Alamance, Davidson, Davie, Forsyth, Guilford, Randolph, Stokes and Yadkin counties in the Triad Metropolitan Statistical Area...

The four areas have a combined total of approximately $333.6 million. A breakdown of each category shows the following:

* Expenditures – All purchasing and spending, totaling $103.8 million, such as supplies, materials, services, fixed charges, construction and capital outlay. UNCG does business with more than 11,000 vendors. The $103.8 million in expenditures had a total economic impact of $175.3 million in the Triad and $163.2 million in Guilford County. It generated an additional $58.3 million in household income in the Triad ($43.8 million in Guilford County), along with including 2,272 jobs in the Triad and 1,708 in Guilford County.

* Wages – Salaries totaling $99.9 million, paid directly to UNCG’s 671 full-time faculty, 208 part-time faculty and 1,370 staff members. Of the employees, 91 percent live in Guilford County and another 6 percent live in the Triad’s eight counties. The $99.9 million generated $199 million in economic activity in the Triad ($163 million in Guilford County), $61.5 million in additional earnings in the Triad ($42 million in additional earnings in Guilford County), and 2,981 jobs in the Triad (2,784 in Guilford County).

* Student spending – All expenses incurred by UNCG’s more than 13,000 students, estimated at $126.6 million, such as books and supplies, rent, food, transportation and miscellaneous expenses, not including tuition and fees paid directly to UNCG. The $126.6 million generates economic activity of $208.1 million in the Triad ($198.1 million in Guilford County), an earnings impact of $50 million in the Triad ($37 million in Guilford County), and 2,433 jobs in the Triad (1,861 jobs in Guilford County).

* Visitor spending – Visitor spending, estimated at $3.5 million, including hotels, restaurants, recreation, retail and transportation. The $3.5 million accounts for total economic activity of $6.5 million in the Triad ($6.1 million in Guilford County), additional earnings of $1.6 million in the Triad ($1.5 million in Guilford County), and 106 jobs in the Triad (86 jobs in Guilford County).

A little more background on Dr. Brod and the methodology.

Ah, the IMPLAN software. I hate it. It makes multipliers sound so official, yet they are so wrong.
Equating spending with productivity. Our old friend Hazlitt would take issue with that.
Pretty smart idea, if you ask me.
1) UNCG already had the majority of data he needed.
2) UNCG's economics department already had a copy of IMPLAN.

So really he didn't have to do much work at all.

I would say for less than a few weeks's worth of actual work he got a publishable report, his name in the paper, and bonus points for making his university look good. That's not a bad idea at all.


would you elaborate on your opposition to IMPLAN or input-output analysis in general.

Chris, same question, what problems are you seeing with his study?

Except for the Human Capital Impacts, everything else looks to be in line with all the economic impact analysis I've seen (i've only seen one :P).

but I am concerned about the "human capital impacts", because they account for nearly HALF of the total economic impacts of UNCG. Human capital is very hard to measure and i would imagine most people educated at UNCG don't stay in Greensboro.

Maybe I'm wrong. I havn't looked at the study. But it does seem odd.
Oh and for a good non-technical explaination of Input-Output analysis (in case anyone wants it), check out:
Part of the problem is the same one found in Cost Benefit Analysis. All of these economic indicators are not "new" -- they are simply alternatives. For example, these "created" jobs are simply shifted from somewhere else where an individual might of been employed. So, to actually make a claim for gains from the existence of UNCG one has to first subtract out the alternative.

Additionally, from a distributional standpoint, it would be appropriate to see where the funds financing UNCG come from to measure their distributional burden compared to their distributional benefits.

Only including the benefits without weighing the costs is not appropriate accounting in my mind.

Input-Output models are pretty useful, but also very problematic and do tend to over exaggerate the benefits of projects. REMI and Implan are supposed to be better, but since I do not have the software it is difficult to actually compare it to others.

From the stand point of the region in question, I would say (most of) these are certainly new expenditures.

Most of the students going to UNCG probably wouldn't go to another chool in the Triad if UNCG wasn't there. So their expenditures in the region count as "new" expenditures and thus have an economic impact. Ditto for the vistors.

Think about it this way, the Triad is "exporting" (to a large extent) educational services to the rest of the world. Any increase "external" spending on educational services at UNCG will represent "new" spending to the region.

If we were talking about the United States as a whole, you would probably be right. It all depends on the region you're looking at. And that's what make EIAs so difficult.
I guess you should look at the demographics of the students. If they are really talking about the Triad area, there are numerous colleges and universities(just like the Triangle). So, its existence is just a shift from the next best alternative in the Triad or in North Carolina.

To be accurate, I think you need to see where the students and professors are coming from. The Staff probably shouldn't be counted at all.

You're right that they probably should look at the demographics of the students. To get a really good answer, you would probably want to see what students originated in the triad, what their second school choice would have been, etc.

It doesn't look like Brod did that. But he might have been justified. What schools in the Triad would substitute for UNCG? NC A&T is the only 4 year public university alternative and it is ranked much lower in terms of educational quality. Assuming students care about the quality of institution and not just the location, my guess would be that most students would have went to another 2nd-tier 4-year public university. That's only a guess, but it might make a good enough assumption considering how expensive and time consuming a survey of students would be.

Maybe a cheap okay answer is better than an expensive perfect answer?

But this all just guessing on my part. I havn't read the study (can't even find it).
Yeah. I can't find it either.

On the schools, you have Wake Forest, Winston-Salem State, Davidson, Catawba, A&T, Guilford, Greensboro, Salem, and Pfieffer.

Those are only the ones I know of off hand. We aren't counting any community colleges and other institutes or trade schools.
I forgot about Winston-Salem State. But how close of a substitute is it to UNCG in terms of academic ranking?

the others I didn't mention seem to not be very good comparable to UNCG. I think they're all private schools and Salem is a woman's college. And are you sure Pfieffer is in the Triad?

Either way, I still don't think it would be too much of a stretch to assume UNCG "exports" most of its educational services from the Triad. It obviously isn't a perfect choice, but even economists live in a world of scarcity. :P
Pfieffer has its original and main campus in Misenhiemer, NC (they have satellite branches in Charlotte). In some people's books this might not be Triad, but it is well within their Economic Development Region.
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