Penn State Economic Impact Report

Penn State is integral to Pennsylvania, serving as a major economic engine, medical, research and cultural hub. Its impact is felt across the commonwealth from an economic, workforce and societal perspective.

The economic impact methodology used to assess Penn State’s contributions involves a detailed input-output analysis powered by the IMPLAN (Impact Analysis for Planning) model. This model examines how Penn State’s spending on operations, payroll and capital investments, as well as student and visitor spending, circulates through Pennsylvania’s economy.

By tracking direct, indirect and induced effects, IMPLAN quantifies the ripple effects that Penn State generates across various industries within the state. Direct effects capture Penn State’s initial expenditures, indirect effects reflect increased activity among suppliers and service providers, and induced effects represent additional economic activity fueled by household spending from employees.

This comprehensive approach highlights Penn State’s role as a significant economic driver, impacting jobs, income and local business revenues across the region.

Direct economic impact: All direct expenditures made by Penn State for its operations. These include operating expenditures, capital expenditures and pay and benefits expenditures.

Direct employment: Total number of employees, both full-time and part-time. Census data for number of Penn State employees was pulled at a point in time versus anyone employed at any time during the year, as was done in the previous study to better reflect the employment realities of Penn State and be more conservative with our assumptions.

Dollar year: Presented in 2024 dollars.

Local and state tax impact: Government revenue or tax revenue that is collected by governmental units at the state and local levels in addition to those paid directly by Penn State. This impact includes taxes paid directly — by Penn State itself, by employees of Penn State and by vendors who sell products to Penn State — and also taxes paid at the household level.

Indirect economic impact: The indirect impact includes the impact of local industries buying goods and services from other local industries. The cycle of spending works its way backward through the supply chain until all money is spent outside of the local economy, either through imports or by payments to value added (multiplier effect).

Indirect employment: Additional jobs created as a result of Penn State’s economic impact. Local companies or vendors that provide goods and services to Penn State increase their number of employees as purchasing increases, thus creating an employment multiplier.

Induced economic impact: The response by an economy to an initial change (direct effect) that occurs through respending of income received by a component of value added. IMPLAN’s default multiplier recognizes that labor income (employee compensation and proprietor income components of value added) is not lost to the regional economy. This money is recirculated through household-spending patterns, causing further local economic activity (multiplier effect).

Induced employment: Additional jobs created as a result of household spending by employees of Penn State and the employees of vendors. This is another wave of the employment multiplier.

Multiplier effect: The multiplier effect is the additional economic impact created as a result of Penn State’s direct spending. Local companies that provide goods and services to Penn State increase their purchasing by creating a multiplier (indirect/supply-chain impacts). Household spending generated by employees of Penn State and Penn State’s suppliers creates a third wave of multiplier impact (induced/ household-spending impacts). The multipliers in this study are derived by IMPLAN.

Study year: Penn State operates on a fiscal year that runs from July 1 to June 30 of the following year. For example, Fiscal Year 2023 (FY23) at Penn State would span from July 1, 2022, to June 30, 2023. This fiscal year structure is used for budgeting, financial reporting and various administrative functions within the University.

Total economic impact: Includes spending on operations, capital expenditures, labor income expenditures and value added to the economy as a result of expenditures made by Penn State. It is the combined impact of direct, indirect and induced impacts.

Value added: Value added is defined as the total market value of all final goods and services produced within a region in a given period of time (usually a quarter or year). It is the sum of the intermediate stages of production.

The 2017 Penn State Economic Impact Report is available on the Office of Planning, Assessment, and Institutional Research website. Visit the site to access the full report and explore past analyses of the University’s contributions to Pennsylvania’s economy.