Do research universities recession-proof their regions? Evidence from state flagship college towns

Using synthetic difference-in-differences models, we study whether US counties containing state flagship universities experienced resiliency via lower unemployment rates during the past three US recessions. We find an insignificant effect for the 2001 recession and a large resiliency effect for the 2008–09 recession. However, counties with flagship universities faced higher unemployment rates during the 2020 recession, and were therefore less resilient to the Covid-19 recession than other counties. These results support the hypothesis that stable consumption demand for non-tradables drives resiliency, which was absent during the 2020 recession when most university campuses were closed to students due to Covid-19 restrictions.