56 Appendix 2: Sensitivity analysis Appendices Appendix 2: Sensitivity analysis Sensitivity analysis measures the extent to which a model’s outputs are affected by hypothetical changes in the background data and assumptions. This is especially important when those variables are inherently uncertain. This analysis allows us to identify a plausible range of potential results that would occur if the value of any of the variables is in fact different from what was expected. In this appendix we test the sensitivity of the model to the following input factors: 1) the alternative education variable, 2) the labor import effect variable, 3) the student employment variables, and 4) the discount rate. The sensitivity analysis focuses on results of the Business program. Alternative education variable The alternative education variable (15%) accounts for the counterfactual scenario where students would have to seek a similar education elsewhere absent the Business program at the college in the region. Given the difficulty in accurately specifying the alternative education variable, we test the sensitivity of the taxpayer benefits analysis results to its magnitude. Variations in the alternative education assumption are calculated around base case results listed in the middle column of Table A2.1. Next, the model brackets the base case assumption on either side with a plus or minus 10%, 25%, and 50% variation in assumptions. Analyses are then repeated introducing one change at a time, holding all other variables constant. For example, an increase of 10% in the alternative education assumption (from 15% to 17%) reduces the taxpayer present value benefits from $14.8 million to $14.6 million. Likewise, a decrease of 10% (from 15% to 14%) in the assumption increases the present value benefits from $14.8 million to $15.1 million. Based on this sensitivity analysis, the conclusion can be drawn that SUNY WCC’s Business program taxpayer benefits are not very sensitive to relatively large variations in the alternative education variable. Thus, even though the assumption is difficult to specify, its impact on taxpayer benefits is not very sensitive. Labor import effect variable The labor import effect variable only affects the alumni impact calculation in Table 3.1. In the model we assume a labor import effect variable of 50%, which means that 50% of the region’s labor demands would have been satisfied without the presence of SUNY Table A2.1: Business program sensitivity analysis of alternative education variable % variation in assumption -50% -25% -10% Base case 10% 25% 50% Alternative education variable 8% 11% 14% 15% 17% 19% 23% Present value taxpayer benefits (million) $16.1 $15.5 $15.1 $14.8 $14.6 $14.2 $13.5
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