This paper analyzes the economic role of rural universities in community development, focusing on their direct, indirect, and induced effects on regional economies. Using case studies and economic impact frameworks, the paper demonstrates how rural universities serve as major employers, anchor institutions, and catalysts for business growth in towns with populations under 50,000. Key findings show that rural universities increase employment opportunities, support local business partnerships, attract educated populations, and generate multiplier effects through employee spending and visitor activity. The research concludes that rural universities are essential instruments for sustainable economic development in rural America, creating stable employment and fostering community growth over time.
Universities have a vested interest in building relationships with the communities that surround their campuses. Rural universities create stronger relationships in smaller communities because they are usually the economic and cultural hubs of the region. While businesses and residents in economically depressed, low-income areas have the option of relocating, rural universities must remain in place. At times, when established community-based projects are unable to continue operating, universities play an important role in filling that gap. Rural universities directly and indirectly provide jobs and purchasing power to the local economy and have the ability to attract new firms to their regions. This paper examines the role of rural universities in community development and the economic impacts—both direct and indirect—that affect regional growth and prosperity. Educational institutions are essential instruments in community economic development strategies in rural areas.
A typical rural college campus in America presents a distinctive character. Students walk to class, sit under trees reading books, and gather for athletic practice. The bell tower signals the arrival of the afternoon, and the grass and trees define the landscape. This peaceful environment is characteristic of life on many rural college campuses across the country.
Defining the term "rural" is more complex than it initially appears. The U.S. Government has 15 different definitions to describe rural areas. While some definitions determine a rural area based on the number of inhabitants per square mile, others conclude that a rural area is based on total population or even by "rural character." In 2014, the U.S. Department of Agriculture Rural Development completed a report that defined rural areas as any area that is not "a city or town that has a population of greater than 50,000 inhabitants." This definition is crucial because it defines rural in terms of a set amount of people rather than in response to land area. Therefore, a community is classified as either rural or non-rural based on population alone.
Merriam-Webster Dictionary defines a university as "an institution of higher learning providing facilities for teaching and research and authorized to grant academic degrees; specifically: one made up of an undergraduate division which confers bachelor's degrees and a graduate division which comprises a graduate school and professional schools each of which may confer master's degrees and doctorates." A university is a higher-education system designed to provide advanced knowledge in areas of interest to individual students. While colleges are designed to be flexible for students wishing to earn a degree on their own schedule, universities benefit not only students but also the community and surrounding areas. Research has established that although in-depth studies have examined the effects of universities on the economic impact of cities, there has been a lack of research on the effects of close proximity between universities and local economies.
Economic impacts are "effects on the level of economic activity in a given area." To measure impacts, a region must evaluate "business output, value added, wealth, personal income, or jobs." Increases in these areas may demonstrate positive economic impacts. Economic impacts result from an "industry, event, or policy bringing in new revenues into the region that would otherwise not occur or keeping revenues in the region." In regions where rural universities are located, rates of high school completion are higher, while rates of unemployment are lower.
The difference between an economic impact and an economic contribution is significant: an economic impact involves net changes in an economy, while economic contributions are based on gross change. Economic impacts involve total income made in the economy after deductions are taken into account, while economic contributions are based on income before deductions. By having a rural university in the region, the human capital is raised by higher-educated residents who are more qualified for available positions. Economic impacts should be measured in terms of "total employment opportunities, aggregated personal income, value added, full income effect, business production, and property values of the area."
For this analysis, the operational definition of economic impact by a university in a rural area is an increase in the levels of business, value, income, and jobs in a city or town with a population of less than 50,000 people that can be directly linked to the activities of a rural university. Through research of rural universities, the economic impacts—including direct, indirect, and induced effects—that currently exist in their regional areas are examined. Direct impacts are created by the rural university as a result of the institution paying salaries or making direct purchases. Indirect impacts are generated by the expenditures of visitors to the region and the jobs at hotels, facilities, retail establishments, attractions, transportation services, and food and beverage providers. Induced jobs include both suppliers to the previously identified industries and businesses and the jobs created by wages spent in the local economy.
According to the U.S. Department of Agriculture Economic Research Services, researchers studying conditions in "rural" America most often examine conditions in nonmetropolitan (nonmetro) areas, defined on the basis of counties. Counties are the standard building block for collecting economic data and conducting research to track and explain regional population and economic trends. Nonmetro counties include some combination of open countryside, rural towns (places with fewer than 2,500 people), and urban areas with populations ranging from 2,500 to 49,999. Based on this definition, the contribution of rural universities should be evaluated for benefits that towns and their populations receive.
Salaries and employment are directly impacted by universities in rural areas. Rural universities create many job opportunities at different employment levels, allowing them to employ a large number of community members. Universities produce significant influence on local employment, which is demonstrated by employment rates. Many rural universities employ over 300 positions annually, contributing substantially to their local areas. For example, one rural university's annual budget of $44 million equates to $110 million added to the regional economy. The University of Alaska Fairbanks creates over 160 jobs annually that are staples of employment within their rural area. Rural universities are assets to their regional economies as they employ local workers and student workers while recruiting personnel into the area. Unlike many other sectors of the economy, rural universities contribute a sense of stability to the region as they are less susceptible to economic downturns.
A rural school provides two things that directly impact employees. First, colleges raise the skills of the area's workforce by allowing employees to become educated through employer discounts and incentives. The creation of educated residents results in higher human capital. These residents will likely continue living within the area and provide the knowledge they have obtained while spending their salaries back into the region. Second, schools increase both the supply and demand of human capital in the area. Rural universities employ a staff of highly educated employees who often need to be recruited to the area. When hiring these employees, the school invites new residents to the surrounding area and brings the employees' families along. These new highly educated employees' families will also contribute their salaries back into the region.
Rural universities create jobs due to the institution's operational needs. As the college continues to grow, there will be a need for additional faculty and administration. However, if the university experiences a downturn, it could bring economic hardship to an area more rapidly because there would be fewer positions needed and fewer students on campus.
Rural universities are large consumers of local suppliers and their goods. This consumption creates additional jobs based on the university's usage of materials, services, and equipment. A school needs services and supplies for laboratories, research, copiers, facilities, mailing, equipment maintenance, and office products. A rural college forms beneficial relationships with small businesses in the rural community. These partnerships are invaluable to the community and directly affect the economy. Usually, a rural school is one of the area's largest employers. A rural campus can use its considerable purchasing capacity, as well as expertise, to encourage business growth, diversity, and the creation of new business ventures and jobs.
Direct impacts on local businesses include the use of utilities. A rural institution of higher education is a large consumer of utilities such as electricity, gas, water, wastewater, garbage, phone services, and internet. Direct economic effect is measured by the transfer of funds from the rural university for goods and services. Unlike direct economic effects, indirect economic effects arise from the correlation between the rural university and economic variables.
Universities in rural areas can have substantial indirect effects on local businesses. Indirect effects are caused by an action and are later in time or farther removed in distance, but are still reasonably foreseeable. They may include growth-inducing effects and other effects related to induced changes in the pattern of land use, population density or growth rate, and related effects on natural systems, including ecosystems.
Small towns thrive off their local businesses, and having a university in a rural town can generate positive effects on businesses in the area. First and foremost, a university in a rural area relies on local businesses for supplies, goods, services, and resources in order to operate. Generally, more business means more jobs for community members and students attending the university. Often, it can be hard to find work for both students and local residents in rural areas, but when universities obtain services from local businesses, it can result in a cause-and-effect correlation. The relationship occurs when a company must hire additional help to accommodate the business received from the university. The increase in revenue could result from money spent on the school for utilities and supplies, and also from salaries paid to employees that are then redistributed throughout the community. These transactions with local businesses thus affect the region's economy by generating more revenue and job positions. Without the contribution of the university and its employees, local businesses would likely not perform as well, resulting in fewer jobs and lower income. Without a significant sustainable employer such as a rural university, a region could experience greater hardship during economic downturns due to lack of stable employment.
Almost all facets of the university use goods and services provided by local businesses. When a university brings in coaches and athletic members from outside the area, it recruits them not only to a new region but also as contributors to the economy. Commonly, the athletic department reaches out to the community for sponsorships, catering, newspaper articles, printing services, and local radio advertisements. Rural universities obtain sponsorships for athletics from local businesses, creating mutually beneficial relationships. For example, when a local restaurant serves as an athletic sponsor, it receives featured placement in the university's sports programs and announcement as a game sponsor at all home sporting events. In turn, the restaurant receives increased business from those associated with the university. Although the restaurant is not receiving direct payment from the university, it indirectly receives business as a result of sponsoring and advertising toward the university community. This relationship exemplifies a positive effect on local businesses by bringing in more patrons and generating more revenue.
The relationship between the rural school and local business can impact multiple companies indirectly, possibly creating new job positions and increasing revenue. The indirect effect continues with increased use of bar and restaurant supplies such as food, beer, alcohol, utensils, plates, and glasses. Advertisements in newspapers result in work for loggers, drivers, and mill workers in the area to create the paper needed. The purchases of bar supplies and paper are indirect because they are not made by the university, but they are equally important to the stability of the region. The local newspaper and the school can have multiple economic effects on each other. The newspaper's publication can benefit the university by covering events such as drama productions, sporting events, fundraising, and important university information. In return, the newspaper obtains more readers, revenue from students and staff who purchase papers, and has its articles featured on the school's website. The indirect effects of the two businesses are correlated and benefit each other immensely.
Visitors, students, and staff indirectly affect food and beverage services to a great extent in a rural community. A majority of a small town's food and beverage services are locally owned, including chain restaurants. As more consumers visit the area because of the university and its functions, more revenue and employment is created for the local economy. The need for food and beverage services also affects local entrepreneurs by giving them opportunities to open small restaurants, coffee shops, or grocery stores that cater to students, staff, and visitors. If the university were not present, the total revenue would be less and inconsistent, resulting in the inability to operate local businesses adequately. The school brings an entirely different demographic to a community, thus changing what the supply and demand are for the community. With the school creating a different population in the area, doors are opened for the community to be more accepting of new requests by consumers, resulting in new markets. These new markets lead to specialty stores, new employment opportunities, and revenue that otherwise may have been spent online or in urban areas.
Rural universities also indirectly affect a community economically by purchasing more luxurious and expensive goods and services. Remodels, additions, and landscaping are services that rural schools often contract out to local businesses or sometimes use non-local businesses depending on the university's needs. These endeavors can last anywhere from six months to a year and can occasionally result in standing contracts. A university's contract with a local business brings in more revenue and creates more job opportunities for community members. The university contacts these companies and their employees, resulting in guaranteed contracts that allow them to evaluate and possibly expand, requiring them to hire more staff. Without the indirect effects of business created by a rural university, the economy could suffer from a lack of revenue to support many of its members. Without a self-supporting economy, the market for homes could decline, which would lead to fewer people contributing to the economy and lower incomes and education levels. The result is that people will eventually leave the area to find suitable revenue, education, and resources elsewhere.
The indirect effects resulting from rural university spending create jobs at suppliers' factories. The positions created by rural colleges carry indirect effects forward, creating an induced effect. An induced impact is generated by the spending of people employed in rural projects. As a result of indirect effects, money is redistributed on local goods and services, thereby providing a boost to the local economy. "The effect of the changes in household consumption on businesses in the community is referred to as an induced effect." Universities in rural areas have significant induced impacts on local businesses for a variety of reasons including: development projects involving out-of-town contractors, campus visitors purchasing goods within the area, and employees and students from outside the area needing housing.
Induced effects can often be hard to detect as they are removed from the school directly. If a rural college decides to expand, many different activities are needed to start implementation of the project. The rural university must address aspects such as surveying, engineering, permitting, construction, and financial matters before beginning a large project. If the school is located in a rural setting, it could be difficult to obtain these services locally. When universities employ service providers from outside the region, the funds used to pay for services do not benefit the community directly. However, the induced effects of these projects include the workers who travel to the rural area and purchase gas, food, lodging, and possibly do some shopping. The workers employed on the project may find the drive home every weekend tedious, resulting in their families visiting the area and also contributing to the induced effect.
Unique opportunities such as working with local businesses and learning how to improve them are presented to professors and students of rural universities. At larger schools in urban areas, there is less of a personal relationship between schools and local businesses because multiple universities often exist in one city. With less personal relationship, such interactive opportunities are less likely to occur. In rural areas, the community often works together for improvement; companies seek help from students and professors to find ways to bring in more revenue. Many local businesses love hiring students for jobs and internships, helping both the business and the student. In many cases, school clubs and athletic teams even do community service for local businesses to create a favorable environment and more support within the community. Most college faculty strongly support the university they represent and the town in which they live, making it probable that they will want to help and give back to local businesses with their earnings. These aspects make rural settings and universities more successful as communities.
When university employees move to a rural area, their families now also contribute to the induced effect. The induced effect continues when extended relatives visit, as they also stimulate the economy. Family members, visiting students, sports fans of college athletes, and arts and theater enthusiasts come to town and often put money into local lodging and activities during their visits, as well as donate to university programs. When businesses make profits from visitors, they pass these benefits on to their employees' salaries. The wages and benefits induced from the rural university are passed down by the direct impact of purchases the school obtained.
Rural areas are supported by college students and professors who need homes to buy or rent, which generates money into the housing market. Housing markets can thrive when professors and students move specifically for school. Rural areas are usually not close enough to other towns to allow people to commute from school to work. Rural universities have large numbers of individuals who need living essentials, furniture, and other supplies necessary for a household. It is much easier to get living room furniture delivered to a home in the same town than finding a way to deliver it from a larger city. Local businesses are a great convenience for these reasons. Along with housing market support provided by rural universities, the creation of families and the increasing population in these areas strengthen the local economy. Impacts on employment and associated population levels can affect government expenditures by changing demand for public services.
Campus employees including professors, administrators, and coaches are vital components of a school. In rural areas, these job positions can often be easily filled because rural settings can be beautiful places for people to start families and settle down or eventually retire. Rural universities not only provide jobs but generate more cash flow to other local businesses. Staff at universities are likely to settle down in the university town and raise families, and college graduates may also decide to settle near their alma mater. This process increases the population in rural towns, creating more cash flow throughout local businesses. A cycle can develop: rural college students get married and have children; their children end up attending the same rural school and marry, and the process starts over. This cycle not only increases the population but also creates loyal customers who love their rural towns and are more likely to persist in and commit to the community.
The athletic programs at rural universities have a very different impact on the region compared to programs at larger city colleges. In rural areas, college athletes get to know local businesses on a personal level. Many enterprises in rural towns support their college athletes by painting shop windows, hanging athletic schedules, and even providing extra service for occasions like game day. Many local business workers will pay to attend college games in rural areas because games can be considered the big Friday or Saturday night events in town. In comparison, rural towns are very different from big city schools, as there are so many different activities for people to choose from in large cities; many may not attend college events. Visitors in support of the local team and the opposing team may eat at local restaurants, make a trip to the store for tailgating needs, buy gas, stay in hotels, and visit a bar after the game.
Induced impacts created by universities in rural locations are crucial to the success of local businesses. As one economic analysis explains, "Employees use their salaries and wages to purchase goods and services from other companies. Companies make their purchases and hire employees, who also spend their salaries and wages throughout the local, regional, and state economies. A chain reaction of indirect and induced spending continues, with subsequent rounds of additional spending gradually diminished through savings, taxes, and expenditures made outside the state." The cycle of local employees spending their salaries on local businesses, and the businesses continuing to spend that money within the rural community, is crucial in rural areas. Induced impacts created by rural universities immensely help the cash flow throughout these regions.
Jobs and employment opportunities created by rural universities are staple positions that raise the skills of the area's workforce. These positions establish new employees and increase growth in the university's human capital as employees move to different and possibly higher positions. For example, a postgraduate who chooses to live in a rural area could become an employee in the accounts receivable department at the region's rural university and five years later become the university's chief financial officer. As knowledge increases and individuals advance in job ranking, the skills of the area's workforce increase as well. Jobs created by rural universities branch from financial positions to facilities management. Athletic programs bring in athletes and coaches from outside the area as well as visitors who follow the college teams. Housing markets increase with the number of new people that rural universities attract, including students and professors. Not only does the sale of houses increase, but the potential for residents to buy and rent out properties also increases, which in turn increases income.
From observations of rural universities, it is evident that the economic impacts on the community created by rural universities are significant. Along with the benefits of rural university implementation, the opening of a college is extensive and expensive. Because schools take time to gain popularity, the community may not see rapid economic benefits. Rather, a rural university's economic impact is created over time and developed in the region. The economic impact by a university in a rural area is defined as an "increase in the levels of business, value, income, and jobs in a city or town with a population less than 50,000 people." Economic impacts are measured through business output in the community, value added by the school, wealth, personal income, or jobs created. Total employment opportunities can be accounted for in regards to aggregate personal income, business production for the local community, and property values in the region.
Based on the research found, economic impacts of rural universities demonstrate the highest gains in regards to increased population, jobs created, raised skill levels of the workforce, and increases in sales of local businesses. Rural universities are essential institutions for sustainable community economic development, providing stability and growth opportunities that benefit both current residents and future generations.
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