Planning Professors Conduct New Analysis of Cornell's Economic Impact

News
November 19, 2014

While the economic recovery of the past six years has primarily benefitted the top 1 percent of income earners, that is not the case in Tompkins County, at least when it comes to the impact of spending by Cornell.

A new analysis finds that Cornell's purchasing, construction, and payroll expenditures have helped residents in all income classes, from households below the poverty line to those earning more than $150,000, according to research conducted by two Department of City and Regional Planning faculty members, Professor Kieran Donaghy and Visiting Associate Professor Yuri S. Mansury.

"The distributional impact of Cornell's economic activity is fairly egalitarian," Donaghy says. "Cornell's expenditures provide that tide that lifts all boats."

This finding is part of a new report, Economic Impact on New York State, which was released by Cornell on October 13. While the 22-page document is the third economic impact study Cornell has conducted since 2007, the report offers new insights into the university's economic influence on the community, the region, and the state because of two new analytic models introduced by Donaghy and Mansury.

In previous reports, Cornell's economic impact in Tompkins County and Central New York was analyzed by measuring multiplier effects of its expenditures. This approach was based on three aspects of the university's spending: the direct effects of its expenditures; the indirect effects — how companies that do business with Cornell pay their employees or buy equipment or services; and the induced effects — how Cornell's employees and its suppliers' employees spend money on items such as food, rent, and childcare.

For example, the new report finds Cornell's direct spending in Tompkins County in 2012 was $834 million, including the university's payroll, purchasing, and construction. On top of that figure, induced impact generated $328 million, and its indirect impact added another $18 million.

Donaghy and Mansury took this analysis a step further by incorporating two types of analyses that allowed them to develop a fuller picture of Cornell's economic impact on the community. The first, a structural path analysis, allowed them to follow how expenditures filter through the community to different households and income classes.

This analysis reveals that half of the total impact of Cornell's purchasing, construction, and payroll spending in Tompkins County benefitted households with incomes of $75,000 or less. For households at the bottom of the scale — those earning $10,000 or less — Cornell's economic impact was $4.7 million, or 3 percent of total income.

This impact is achieved through Cornell's induced or indirect influence — the construction worker building a project on campus who buys a drink at a hotdog stand and the food operator who then hires a teenager to rake leaves. "In an economy, everyone will be connected to everyone else," Mansury explains. "Even the lowest income groups will benefit from Cornell's expenditures."

Another new tool Donaghy and Mansury introduced in the 2013 report was a computable general-equilibrium model, which enables researchers to study the effects of government policies or university economic development initiatives on regional economies — taking into account supply and demand behavior, price adjustments, and resource constraints leading to crowding out of investment. Donaghy says that he and Mansury plan to use this model to analyze the impact of the construction and operation of the Cornell Tech campus on the New York City economy later this year.

By Sherrie Negrea