Student Spending

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Christopher A. Bailey baile1ca@cmich.edu is an Assistant Professor; Gregory A. Falls falls1ga@cmich.edu is a Professor; Paul A. Natke natke1pa@cmich.edu is a Professor; and Philip B. Thompson thomp1pb@cmich.edu is an Associate Professor in the Department of Economics at Central Michigan University, Mount Pleasant MI 48859. FAX 989-774-2040. Phone 989-774-3870.

Abstract
We used a stratified random sample to examine the spending patterns of a traditional student population at one large residential university in a small Midwestern town. Juniors and seniors spent more than underclassmen on recreation, food, general merchandise, and miscellaneous items. Male students spent more on recreation (40 percent more) while females outspent males on books and school supplies. Off-campus residents spent about twice as much on recreation, as well as more on food and for general merchandise. Those paying all their college expenses spent more overall and on general merchandise, food, and utilities. Students paying none of their college expenses spent less overall and less on gasoline and total miscellaneous items. Students who worked spent more overall and more in the following areas: general merchandise, food, utilities, and telecommunications. We also examined budget shares. Overall, books and recreation spending tend to be fixed as total spending increases, thereby reducing budget shares for these items. Women devote larger shares of their budget on

general merchandise, while men favor recreation. Students who pay none of their college expenses spend relatively more on recreation and books. Working students devote larger shares of their budget on rent and telecommunications. Non-working students spend relatively more on recreation and books. These results should be interpreted with caution since they represent a case study and do not apply to all university settings.

Introduction
Spending by college students has been identified as an important component of total consumer spending in the United States. One marketing firm estimated that “traditional” college students, i.e., full-time students enrolled in fouryear institutions, who represent about one-third of all students, spent $23 billion in 1995 on essential items such as rent, food, gas, car insurance, tuition, and books. Another $7 billion was spent on nonessentials (Ring 1997).

Spending by college students may be very important to local communities because many residential colleges are large relative to the size of their host community. These colleges are often seen as important players in the local economy through current spending and employment and also as potential catalysts for local economic development (Onear, 2007).

Many universities have conducted economic impact studies to measure the overall influence the institution has on the local economy (Bailey et al., 2007; Beck, 1995; Eliot 1988; Felsenstein, 1996). What is sometimes underplayed is the role of students in determining the overall size and industry mix of the local economy. Local economic impact studies often use figures for student spending derived from secondary sources such as financial aid office estimates of the dollars needed by students for miscellaneous expenditures during the year. More precise information on the magnitude and pattern of student spending would improve the accuracy of studies of universities’ economic impact. In this paper we analyze the spending behavior of traditional college students, who account for a large portion of the revenues of many local businesses in small towns hosting residential colleges. Although total spending by a student is often less than that of a local resident, student spending is concentrated in just a few areas, such as entertainment and food and beverage purchases in stores. In addition, many national retailers view traditional college students as a lucrative market since lifetime buying habits are formed in part during a person’s college...
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