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The economic impact of City of Glasgow College, December 2020 - Fraser of Allander Institute
We follow the same approach as outlined in Fraser of Allander Institute (2017). The key steps are as
follows -
■ Step 1: We identify the latest econometric evidence measuring the private returns to college
graduates in terms of wage premia . In practice, this involves measuring the productivity
enhancing effects associated with the additional human capital generated by Glasgow
College graduation cohorts for the years 2011/12-2018/19.
■ Step 2: We use this evidence to inform the specification of a Computable General
Equilibrium (CGE) model of Scotland. We use the latest version of the Fraser of Allander's
AMOS model .
We focus our analysis to the impact of graduates obtaining nationally-recognised qualifications
only. Finally, where a graduate has gained multiple qualifications, the data only includes one of
these qualifications.
Understanding the model
The increase in labour productivity is the only external change introduced, so that the results
represent the deviation from what would have occurred; so they indicate, for example, how much
higher Scottish GDP is as a consequence of the increase in human capital created by City of Glasgow
College.
Essentially, the increase in productivity allows the same amount of output to be produced with fewer
workers, decreasing the effective cost of labour.
There are conflicting forces working to change employment. Since fewer workers are now required to
produce a given output, this tends to reduce demand for workers. But, against that, the improvement
in competitiveness itself helps to boost demand for workers.
In the short-run the adverse effects on employment predominate, so any increase in productivity is
associated with an initial fall in employment. These initial negative effects, however, do not prevail,
over which period the positive competitiveness effects dominate.
The net effects of the productivity improvement unambiguously stimulate economic activity.
Chart 1: Percentage change in Scotland's GDP and Employment since year zero
Source: Fraser of Allander Institute