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Upjohn Institute Working Paper No. 08-140




This paper examines the effects of expansions in higher educational institutions and the medical service industry on the economic development of a metropolitan area. This examination pulls together previous research and provides some new empirical evidence. We provide quantitative evidence of the magnitude of economic effects of higher education and medical service industries that occur through the mechanism of providing some export-base demand stimulus to a metropolitan economy. We also provide quantitative evidence on how much higher education institutions can boost a metropolitan economy through increasing the educational attainment of local residence. We estimate that medical service industries pay above average wages, holding worker characteristics constant, whereas the higher education industry pays below average wages; the wage standards of these industries may affect overall metropolitan wages. We also discuss other mechanisms by which these two industries may boost a metropolitan economy, including: increasing local amenities, generating R&D spillovers, increasing the rate of entrepreneurship in local businesses, and helping provide local leadership on development and growth issues. Finally, the paper discusses possible effects of these two industries on disparities between the central city and suburbs in a metropolitan area.

Issue Date

February 2007


Paper prepared for the Conference on Urban and Regional Policy Effects, held on March 29-30, 2007, and sponsored by the George Washington University Institute of Public Policy and School of Public Policy and Administration, the Brookings Institution, and the Urban Institute. A substantially shortened version of this paper was published in the book Urban and Regional Policy and Its Effects (Margery Austin Turner, Howard Wind, and Hal Wolman, eds.) Brookings Institution Press, 2008 under the title: The Local Economic Impact of 'Eds & Meds': How Policies to Expand Universities and Hospitals Affect Metropolitan Economies.

Subject Areas

EDUCATION; Postsecondary education; ECONOMIC DEVELOPMENT; Industry studies; Regional policy and planning; Urban issues


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Bartik, Timothy J. and George Erickcek. 2007. "Higher Education, the Health Care Industry, and Metropolitan Regional Economic Development: What Can 'Eds & Meds' Do for the Economic Fortunes of a Metro Area's Residents?" Upjohn Institute Working Paper No. 08-140. Kalamazoo, MI: W.E. Upjohn Institute for Employment Research. https://doi.org/10.17848/wp08-140