Knowledge that Transforms

Minutes of the Meeting of the Executive Committee in Boston, MA, April 25, 2003

have provided us with a wealth of information about the newest products of U.S. Ph.D. programs. Among the notable facts are the continuing decline in the share of U.S. natives among these new graduates, their continued success at landing academic and other professional jobs, and their high level of professional fulfillment, in terms of both job satisfaction and outcomes measuring up to expectations. There are also a variety of intriguing results. For example, (from their table 5) students completing the top Ph.D. programs were younger, less likely to be married, and more likely to be foreign than those in the overall sample. Perhaps most disturbing, (from their table 6) median starting full-time academic salaries were lowest in public economics, a result that cannot be accounted for in salary regressions with other covariates. This clearly is an inversion of the appropriate ranking. In my comments, I will focus on two selected aspects of Ph.D. programs and the Ph.D. job market.

Governments can efficiently provide liquidity, as when the banking system is bailed out. We study a model in which not all assets can be used to purchase all other assets at every date. Agents sometimes want to sell projects. The market price of the projects sold depends on the supply of liquidity, which is determined in general equilibrium. While private liquidity provision is socially beneficial since it allows valuable reallocations, it is also socially costly since liquidity suppliers could have made more efficient investments ex ante. There is a role for the government to supply liquidity by issuing government securities.

The 3 July 2002 issue of the Chronicle of Higher Education described the matter we are discussing today in these words: "Taken together. African-Americans and persons of Hispanic origin represent only 8 percent of full-time faculty nation-wide, and while 5 percent are African-American, half of them work at historically black institutions. The proportion of black faculty members at white institutions is 2.3 percent, virtually the same as it was 20 years ago." We are privileged to have the opportunity to explore this issue from two different perspectives. The first contends that unless major changes occur, the number of minority students interested in and prepared for faculty positions will remain dreadfully insufficient and that, furthermore, affirmative action has been a culprit in this process and leads many of these students into higher educational environments in which they do not perform well enough to even seriously consider or be considered for careers in academe. The other position says that, although the supply of minority faculty candidates is admittedly small, the relatively low level of commitment from higher educational institutions to recruit, hire, and promote minority candidates and the salary disparity between academe and industry lead to a problem of demand that must be appreciated and addressed. Furthermore, it argues, affirmative action has been beneficial in increasing minority faculty presence

We study the inferences about labor adjustment costs obtained by the gap methodology of Caballero and Engel [1993] and Caballero, Engel and Haltiwanger [1997]. In that approach, the policy function of a manufacturing plant is assumed to depend on the gap between a target and the current level of employment. We Þnd that their rejection of the quadratic cost of adjustment model, based upon evidence of nonlinear hazard functions, may not be justiÞed. Instead these nonlinearities may reßect difficulties measuring the gap. Thus it appears that the gap methodology, as currently employed, may be unable to identify the costs of labor adjustment. ∗We are grateful to seminar participants at Boston University, the University of British Columbia, University of Texas at Austin and the 2000 CMSG conference at McMaster University for comments and suggestions. Discussions with John Haltiwanger and Daniel Hamermesh were much appreciated. The authors thank the NSF for Þnancial support. The views expressed herein are solely those of the authors and do not necessarily reßect the views of the Federal Reserve Bank of Kansas City, the Federal Reserve Bank of Minneapolis or the Federal Reserve System.