The impact of the university upon local economy: three methods to estimate demand-side effects

The University, as an income-expenditure flow, has positive effects in local economic development. These effects can be classified into two categories: supply effects—related to human capital and research—and demand-side effects—related to expenditure and its multiplier impact on local economy. This paper focuses on the demand-side effects of the University of Alcala (Madrid, Spain) using three different methods: (a) A simplified version of the ACE Model; (b) The Ryan short cut model and (c) the input-output technique taking into account the inside of I-O, a household sector to estimate the induced effects. The main objective of this paper is to show the advantages, limitations and scopes of each method. Finally, we propose a way to distribute territorially these effects in the Community of Madrid, using eleven intra-regional areas.