Impact of economic cycles on development of universities:

procyclical or countercyclical?

Alexey SemenkovAssistant of Labor & Personnel Economics Department of MSU Faculty of Economics

2

The purposes of the study

• To reveal procyclical and countercyclical relationship between economic dynamics and development of universities

• To explore factors that determine this relationship

• To identify the foundations for sustainable development of the university

3

Literature Review

Prof. Auzanpapers about path dependence problem(2013-2015)

Acemoglu & Robinson“Why Nations Fail…”(2012)

• Mission of university• Positive impact on cultural factors of

economic modernization• Education of the elite

• Absence of cultural factors' impact on economic growth

• Universities as inclusive institutions• Incentives and opportunities to

economic success of nations

• Alexander A. Auzan - Dean of the Faculty of Economics of Lomonosov Moscow State University• Daron Acemoglu – Massachusetts Institute of Technology (John Bates Clark Medal in 2005)• James A. Robinson - Harvard University. Website: http://whynationsfail.com/

4

Procyclical impact of economic dynamics on development of universities

• Negative shocks =>• Average income per capita ↓ =>• Possibilities of investing in human capital ↓ =>• Effective demand for educational programs ↓

• Crisis => Investment programs ↓ => • Projects to development of universities ↓ =>• Shift timing of development (stagnation)

1 Demand shocks

Supply shocks2

• Economic transition → transitional period in universities’ life =>

• Conversions in paradigm and teaching techniques

Technological shocks3

5

Procyclical impact of economic dynamics on development of universities

(1) Central statistical data base, the official website of Rosstat: http://cbsd.gks.ru/#(2) Collections of Rosstat "National accounts of Russia“ http://www.gks.ru/bgd/regl/b15_15/IssWWW.exe/Stg/4.1.xlsx(3) Statistical information on implementation in Russian universities the main directions of the Bologna process: http://www.bologna.ntf.ru/p18aa1.html

19981999

20002001

20022003

20042005

20062007

20082009

20102011

20120.0

500.0

1000.0

1500.0

2000.0

2500.0

3000.0

3500.0

4000.0

80

85

90

95

100

105

110

115

120

Number of students enrolled for a full refund of tuitionDynamics of real disposable income

Thousands of students %

1

2004 2005 2006 2007 2008 2009 2010 2011 2012 20135000

10000

15000

20000

25000

30000

0

50

100

150

200

250

GDP per capita at PPP (in current prices)Investments in fixed capital (education)

billion rublesbillion dollars

2

3

2005/2006 2006/2007 2007/20080

1000

2000

3000

4000

5000

6000

Russian transition to Bologna process model

bachelor programs master programs

quantity of programs

6

Countercyclical impact of economic dynamics on development of universities

• Recovery => matching frictions↓ => • Expectations of workers to get a suitable job

place without high level of education ↑ =>• More need in education programs as signals

• Crisis => Job losing ↑ => • More need in new competences =>• Go to the universities for more human capital

(MBA or Master’s degree programs)

1Signaling

explanation of education

Human capital explanation of

education2

7

Countercyclical impact of economic dynamics on development of universitiesQuestion: Are you ready now to retraining? Answers:

Research center of the portal Superjob.ru (2015): http://www.superjob.ru/research/articles/111735/iz-hr-menedzherov-v-buhgaltery-iz-yuristov-v-ekonomisty-v-krajnem-sluchae-soglasny-prodavat/. Sample size: 1600 respondents

0%5%

10%15%20%25%30%35%40%45%50%

2009201020122015

2

1

8

Conclusions

IN THE LONG RUN IN THE SHORT RUN

MORE PROCYCLICAL

MORE COUNTERCYCLICAL

IMPACT OF ECONOMIC CYCLES ON DEVELOPMENT OF UNIVERSITIES IS…

9

Conclusions

Principles are the basic of sustainability of universities

Significant positive effect of university’s development in the long term perspective

Measures to hedge cyclical risks are to perform the University’s long-term development program

1

2

3