Tertiary education expansion and regional firm development

Abstract

This study investigates the impact of a tertiary education expansion on regional firm development, as measured by average profits per firm. We exploit the quasi-random establishment of universities of applied sciences (UASs) – bachelor’s degree-granting three-year colleges teaching and conducting applied research – to construct treatment and control groups and to apply both a difference-in-differences model and an event study design. We find that after the establishment of new UASs in Switzerland, average profits per firm in the treated municipalities increase by 19.6% more than in the control group. This increase corresponds roughly to an additional annual growth in average profits per firm in the treatment group of 0.7%. The effects start shortly after the establishment of UASs but also persist over a period of up to 10 years.