In an increasing number of ways could the economic impact of universities be examined, an issue this blog has previously discussed. Nevertheless, one of the ways which has widely been adopted by many scholars is an economic model called the Keynesian multiplier. Introduced in the 1930s by Richard Kahn, a British economist, the Keynesian multiplier theory shows that, a university, like any other production activity, undertakes its business through the purchase of inputs which in turn produce outputs.
A general assumption held by the literature is that, “an injection of expenditure into a university leads to expenditure by that institution on staff salaries and goods and services, which together with spending by students coming into the local area raises output and hence income in the area” (Huggins and Cooke, 1997). These increases in income in the region lead to subsequent rounds of spending by those benefiting from the expenditure. What is usually referred to as the Keynesian multiplier process is exactly this induced effect.
Indeed, universities purchase goods and services to support academic, research, and public service programmes, as well as activities such as operations and maintenance. Items purchased vary from scientific equipment, medical equipment, to classroom and office furniture, and to building services and other professional services. Universities purchase goods and services needed from businesses located locally, regionally, nationally and internationally. This leads the question of what percentage of the purchase has been made, say, in the same region, as this issue is directly related to the potential economic impact of any given university on its region.
In this article, we intend to show the spatial distribution of procurement of goods and services by the seven Irish universities in the academic year of 2010-11. Of the seven Irish universities, three are located in Co. Dublin (DCU, TCD, UCD), with each of the rest four being situated in Co. Cork (UCC), Co. Galway (NUIG), Co. Kildare (NUIM) and Co. Limerick (UL) respectively.
Data used in the analysis has been sourced from a number of organisations, in particular the HEA and the IUA. The total expenditure of universities on goods and services with breakdown details was provided by the HEA, which has relevant data between 2001-02 and 2010-11. The IUA kindly provided the top supplier information, referring to the largest purchases made by universities in 2010-11.
It should be reminded that the exclusion of purchases in the lower value range, the majority of which are supposed to be placed with local businesses, would underestimate the local impact of universities. Using the FAME database, the registered address of most suppliers was added, while we had to exclude those suppliers whose address was difficult to specify. Finally, the purchases that have been categorised as ‘Capital’ have also been excluded.
Although data used in this article was provided by the HEA and the IUA, its analysis and interpretation is the sole responsibility of the author. Neither do the findings of this article necessarily represent the views of these organisations.
Table 1 Summary of top suppliers to Irish universities, 2010-11
|No. of top suppliers||Largest purchase (€)||Smallest purchase (€)||Average purchase (€)||Median purchase (€)||Total purchases (€)||Total expenditure (€)||Total purchases as % of total expenditure|
Source: Author’s own elaboration.
Table 1 above presents a summary of the data. The number of top suppliers included in the analysis ranges from 96 for UL to 124 for TCD, accounting for, as might be expected, only a modest share of total number of purchases. To collect the full list of suppliers in the future would strengthen the representativeness of the sample. In the academic year of 2010-11, the largest single purchase made by Irish universities was found in UCC (€2,835,664). Among the selected purchases – which are the largest ones for each university – the smallest purchase was made by NUIM (€25,668). The total purchases covered by the list of top suppliers vary from €15,006,403 for NUIM to €43,465,472 for UCD. Table 1 also shows that the data analysed here accounts for relatively high shares – at least 30.48% – of the total expenditure by universities.
Figure 1 Spatial distribution of purchases by Irish universities, 2010-11, %
Source: Author’s own elaboration.
Here is a kind note to explain what regional, national, and international refer to in figure 1. By regional we mean the same region of the university; for example Co. Dublin for UCD or Co. Limerick for UL. National is used to measure the purchases made by the university somewhere outside its own region but still within Ireland. Therefore, the total of ‘regional’ and ‘national’ refers to the purchases made in Ireland, with ‘international’ meaning any purchase from overseas. For each university, the sum of these three numbers is 100.
As shown in figure 1, there is a clear divide between Dublin-based universities and those located outside Dublin in terms of purchasing activity. For UCD, TCD and DCU, the majority of purchases were made within the Dublin area, while for the rest universities, regional businesses only secured a much smaller share of university procurement. It is probably not surprising, given the economic dominance of Dublin in the Irish economy. Indeed, for universities such as NUIG, NUIM and UCC, a very large share of their national purchases – outside their own region but within Ireland – were placed with businesses in Dublin. International businesses accounted for less than 7% of total purchases made by all but two universities, namely TCD and UL. Further analysis is required to fully understand the relationships between these two institutions and internationally based firms.