The role of West Virginia University in the economic development of West Virginia: A general equilibrium approach

Universities, industries and government are major institutions and play an important role in local economic growth and development. They often work collectively in achieving these goals. While the role of institutions in economic development is well-founded in the literature, a university\u27s strategic role as an institution to encourage local area development is only now being recognized. The existing literature recognizes the spillover effect of mainly university research on local industrial productivity and innovations at the national level. The impact of various university activities on numerous other local economic development indicators like per capita income, poverty, school enrollments etc., at county level has not been attempted. That is, the impact of a university on the local economic development beyond industry research and development and the interaction between the major institutions in this context-- namely, university, local business, local community and government remains unexplored. The identification of these interactions have the potential to guide policy makers in devising economic policies and formulating budgetary plans.;To extend the existing literature, this research develops a static general equilibrium model of the local economy to assess the impact of diverse activities of West Virginia University, using the holistic approach suggested by Hoffman and Hill (2009) and other existing literature. The analysis is based on the county level data of West Virginia for 55 counties over the period of seven years from 2001-2007. The study controls for other influencing factors on economic development like community, industry and government. Based on previous studies, the analysis identifies spatial dependence as a factor of university spillovers to local areas. Thus, the study uses both spatial and non-spatial models for analysis. The non-spatial models employed consist of Least Square Dummy Variable regression (LSDV), Fixed Effects Panel Regression and Seemingly Unrelated Regressions (SUR) Panel Fixed Effects Model. Following Elhorst\u27s (2010) testing procedure, the Spatial Durbin Model (SDM) is employed for spatial analysis.;The results are interpreted for policy analysis considering the limitations of the model and the available data. The results find positive university spillover on the economic development indicators: Per Capita Income, Poverty, Public School Enrollment, Patents, Industrial Wages and Earnings. The empirical models estimated in this study identify the various channels through which a university impacts the local economy. The study concludes, the impact of West Virginia University has a significant influence on all the economic development parameters measured in this analysis. This positive stimulus will be larger with greater industrial collaborations in terms of research. Furthermore, broader government support in terms of grants for high-tech research and development and providing a positive economic environment for fortifying industrial connections will result in sustainable economic growth and development