University of Kassel: Regional economic effect of over 10,000 jobs achieved

More than 10,000 jobs in the region of Northern Hesse are directly or indirectly caused by the University of Kassel; if the large spin-offs such as SMA were added, the figure would even be more than 15,000. In the meantime, the regional economic effect of the University of Kassel through spin-offs and knowledge transfer is greater than that caused by the consumption of employees and students as well as the university expenditure in kind in the region.

This is the outstanding result of the now available study by Prof. Dr. Frank Beckenbach, Maria Daskalakis and David Hofmann, Department of Environmental and Behavioral Economics at the University of Kassel, which was presented at a press conference. The study "The Economic Significance of the University of Kassel for the Region of Northern Hesse", which was commissioned by the University Presidium and supported by the Kasseler Sparkasse, shows: Kassel University is increasingly living up to its claim to be the economic engine of the region.

"Since the beginning of the 2000s, we have emphasized the strategic importance of the University of Kassel for the innovation dynamics of the region and have consistently underpinned it structurally by expanding the knowledge transfer structures," says University President Prof. Dr. Rolf-Dieter Postlep.

As early as 1999, a study on the regional economic significance of Kassel University was conducted under the direction of Prof. Dr. Rolf-Dieter Postlep and his colleagues Dipl.-Oec. Lorenz Blume, Dr. Oliver Fromm and the then student assistant Maria Daskalakis in the Department of Economics at Kassel University. The conclusion at the time: "The University of Kassel (GhK) has a positive regional economic impact in North Hesse. Despite good approaches, however, the university is not yet sufficiently utilized by North Hessian companies as an innovation potential. Information deficits about the university must be reduced and joint structures for easier knowledge transfer must be strengthened."

Innovative strength through knowledge
The study by Beckenbach, Daskalakis and Hofmann proves that this has now been achieved very well. "One sub-sector that is important for the economic dynamics of the region is the founding of companies by graduates of the University of Kassel (spin offs). Thus, not only is the knowledge imparted at the university implemented, but these companies also require inputs for the procurement of materials and services, some of which are sourced from the region." According to a survey of Kassel University spin-offs in 2006, the responding companies employed a total of 2,019 people and generated sales of 213 million euros. "If these results are extrapolated to the total in question, then today there are around 5,200 employees and a turnover of almost 420 million euros," as Prof. Beckenbach explains. In this extrapolation, spin-off companies with a large number of employees were initially not taken into account for methodological reasons. If we now add their number of employees, we arrive at a total figure of 10,150 employees. These start-up companies also require intermediate inputs such as materials, etc. If this is included, the induced turnover amounts to around 465 million euros and the number of jobs created or secured increases to around 5,550 (or 10,500 if the large spin-offs are included).

Qualified employees and knowledge transfer with a positive effect

Since the university does not generally sell its "products," the impact of these "products" on the region cannot be read directly in terms of sales or value added. However, in addition to the spin offs, the training of qualified employees for the region's businesses, the empowerment of future entrepreneurs, and the direct generation and transfer of knowledge can be considered "products" of the university. The number of jobs filled by graduates of the University of Kassel in the regional economy and the earnings they generate can be used as one indicator in this regard. According to a survey of the 2007 graduating class by the International Center for Higher Education Research at the University of Kassel, 57 percent of graduates remain in the region as professionals after graduation. This corresponds to 940 jobs for 2007. Assuming an above-average gross income for these graduates, a value-added contribution in the region of around 29 million euros can be calculated from this.

Cash inflow from the university generates regional demand

The University of Kassel with its approximately 2,800 employees (by headcount), more than 20,000 students and its budget for research, teaching, investments, third-party funds as well as the Kassel Student Union of around 240 million as well as additional funding for university buildings triggers a regional demand and leads to a considerable economic impact on the region of North Hesse via multiplier processes.

According to calculations in the current study, the total demand effect adds up to around 286 million euros. This corresponds to a value added of 167 million euros and 5,100 jobs required for this. In addition to trade, business-related services, the construction sector and the food sector are the main benefiting industries.

In detail: For university activities, there are personnel expenditures and material expenditures for energy, computers, books, office supplies and the like (along with assigned services). In addition to current expenditures, there are one-time expenditures, primarily construction expenditures. In addition, student consumption expenditures must also be taken into account when considering the economic impact of the university. In 2009, about 50 million euros of the university's total personnel expenditures (for about 2,800 employees), 28 million euros for material expenditures, 21 million euros for construction expenditures and about 119 million euros for student maintenance were effective in the region. This results in a total expenditure volume of around 218 million euros.

This not only generates sales, but also creates jobs (job effect) and generates additional income through this (value-added effect). This primary effect of the total demand emanating from the university further leads to the fact that the providers of the demanded goods and services in turn require goods and services for the necessary production and create jobs. This in turn generates sales, jobs and income (secondary effect, tertiary effect, etc.). Typically, therefore, for every euro spent on the purchase of goods and services, more than one euro in sales is generated in the region (multiplier effects). According to calculations in the current study, the total demand effect adds up to around 286 million euros. This corresponds to a value added of 167 million euros and 5,100 jobs required for this.

Working together for the region's bright minds

"The results of this study underline the outstanding importance of the University of Kassel for the economy and development of North Hesse," as Ingo Buchholz, Chairman of the Board of Management of Kasseler Sparkasse emphasized on the occasion of the presentation of the study. "Kasseler Sparkasse is a partner of the University of Kassel and has traditionally and reliably supported it."

 Overall regional economic effects of the university (tabular overview).

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Note to editors: The abstract of the study is available at
http://www.uni-kassel.de/uni/fileadmin/datas/uni/presse/anhaenge/Regionaloekonomische-Effekte-Universitaet.pdf

Literature:

• Prof. Dr. Frank Beckenbach, Maria Daskalakis and David Hofmann: The Economic Significance of the University of Kassel for the Region of Northern Hesse. In: 40 Jahre Universität Kassel, pp. 22-25, published by kassel university press, Kassel in October 2011, ISBN PRINT: 978-3-86219-196-3.
• Lorenz Blume/Oliver Fromm: Regional economic significance of universities. An empirical study using the example of the University of Kassel. Gabler Edition Wissenschaft, Deutscher Universitätsverlag, Wiesbaden 2000

Info 

Prof. Dr. Frank Beckenbach/Dipl.-Oec. Maria Daskalakis

University of Kassel

FB7 - Economics
Institute of Economics

Tel.: 0561/804-3883/3884

E-Mail: Beckenbach[at]wirtschaft.uni-kassel[dot]de