News Service

12-06-07

Economic study finds ISU worth $1.52 billion to state economy in 2006

AMES, Iowa -- Iowa State University accounted for $1.52 billion in state economic impact during the 2006 fiscal year, according to a report by ISU economists David Swenson and Liesl Eathington.

The economists used the Iowa State University Fact Book 2006-2007 -- an annual compilation of university student, performance and operational data -- and an input-output (I-O) econometric model in compiling their report. The model provides a detailed measurement of the characteristics of the Iowa economy and allows an estimate of the relationships that university and student activities have with other industries and service providers within the state. Once the model was constructed, a simulation was run to measure how the current economy responded to or demonstrated dependence on the institution.

"It's obvious that an institution is going to have an economic impact," said Swenson, an associate scientist and lecturer in economics and community and regional planning at Iowa State. "What I want to know is how much is it, and how does it fit into all of the economic activity in the state. So in my case, this is purely an objective piece of inquiry on how much.

"The other part is that I don't think the average citizen of Iowa understands the scope of services the university provides as both an educational and national research institution," he said.

Swenson says they focused on these four areas in their analysis:

• The university's value as an educational and research institution -- drawing students to the region, and external funding sources for research projects that impact people in the region and worldwide.
• How ISU interacts and relates with all the service providers that have inputs into the university. "All the things the university needs to buy to be a university," said Swenson.
• How ISU employees, and the university's suppliers, spend their money within their communities. "That's what we call the 'Main Street effect' or the 'household effect,'" he said.
• And how many students the university attracts, and how they spend their money to contribute to the local and state economy.

"This study measured the economic impact of everyone affected by the university -- either directly or indirectly -- and how they go about spending their money to contribute to the local economies," Swenson said. "You get an estimate of all the jobs that are created by the university, and more importantly all the income that is sustained by the university in the economy."

In addition to ISU's overall economic impact, the research determined:

• The direct economic output value of all ISU services was $860.95 million, of which $579.5 million in labor incomes were paid to 13,843 faculty, staff and student workers.
• Iowa State required $180.64 million in Iowa-supplied goods and services, supporting 2,230 additional jobs earning $62.7 million.
• When the university's workers and the supplying sector's workers converted their labor incomes into household spending, they sparked another $479.8 million in purchases, which yielded another 5,342 jobs making $145.1 million in earnings.
• All totaled, ISU either directly or secondarily accounted for 21,415 jobs and $787.3 million in labor incomes.
• Using ISU student aid budgets to estimate all non-educational spending, it was determined that ISU students spent $162.3 million in the central Iowa economy for necessary goods and services such as housing, food, travel, medical care, entertainment, etc. That spending supported 1,805 jobs and $37.12 million in incomes.
• When considering additional supply demands and household purchases stimulated by ISU student spending, the total economic value was $229.4 million in industrial output, requiring 2,473 jobs making $58.4 million in labor incomes.

"We have the university as an educational institution and it provides a set of goods and services to students and to the state of Iowa," Swenson said. "When we do economic impacts though, we have to take into account the fact that our students are residents of a community. But for the university's presence, we wouldn't have these students here. So what we want to know is because students have a wide array of non-university spending, what's their contribution to the regional economy?"

Swenson said this study did not examine the economic impact of Iowa State as a cultural, entertainment, recreational and athletic center that annually attracts thousands of visitors.

A complete copy of the report is available by scrolling to Swenson's name at http://www.econ.iastate.edu/research/webpapers/paper_12855.pdf.

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David Swenson

Quick look

Iowa State accounted for $1.52 billion in state economic impact during the 2006 fiscal year, according to a report by ISU economists David Swenson and Liesl Eathington. The economists used the Iowa State University Fact Book 2006-2007 -- an annual compilation of university student, performance and operational data -- and an input-output (I-O) econometric model in compiling their report.