Higher education institutions have been depicted in the literature as facilitators of educational opportunity and engines of economic growth in their respective local, geographic communities. Following the rationale behind their localized impact, the absence of colleges due to their closures is expected to have local ramifications; nonetheless, comprehensive empirical evidence on the local effect of college closures is currently lacking. To address this gap, I leverage synthetic control methods to examine the effect that closures have on local educational and economic outcomes in South Korea and the United States. First, in South Korea, I investigate the impact that the closures of three universities and one junior college have on local college enrollment and business activity. I do not find strong evidence that closures—especially that of four-year universities—dampen local college enrollment. In terms of local business activity, I detect some declines in healthcare and social or educational service employment following the closure of certain institutions but not for all. Additionally, for some institutions, I find evidence of declines in the number of wholesale and retail trade establishments or in professional, science, and technical service employment as institutions receive governmental penalties due to their poor performance, prior to the actual ceasing of their operations. Second, in the United States, I examine the case of four public and/or private non-profit institutions on county college enrollment, gross domestic product, and business activity. I do not detect effects in terms of local college enrollment, suggesting that alternative options or substitutes were available in other neighboring districts. For economic outcomes, the results are mixed across different cases and outcomes, with some evidence of declines in the accommodations and food services, retail trade, and educational service sectors for some localities. Overall, across both national contexts, findings reveal that even when closures do not move the needle in the overall economy, specific industries at certain localities may experience repercussions. As such, when closing a college is inevitable, it would be important to consider the unique characteristics of the institution and the local area to minimize potentially negative effects.
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