Local economic impact of small, non-research private universities: evidence from Japan

Abstract

This study examines the local economic impact of small, non-research private universities in Japan, where expanding higher education access has historically relied on these institutions. Our prefecture-year fixed effects model from 1955 to 2015 reveals that a 10 % increase in the number of these institutions led to a 0.4 % increase in the prefecture's GDP per capita. However, this relationship was more pronounced during the 1960s, a period of rapid economic expansion, and diminished in subsequent years as the country's economic growth slowed. Our research also shows that these universities have not contributed to the local stock of human capital or promoted local innovation. Instead, they temporarily stimulated local capital investment. Our research suggests that universities with limited research capacity are unlikely to contribute to local economic growth after the country's economy has moved out of the expansion stage.