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Does your first job out of graduate school matter?

Written By: Jason Shafrin - May• 10•07

An interesting article from Slate discusses an NBER working paper by Paul Oyer (“The Macro-Foundations of Microeconomics: Initial Labor Market Conditions and Long-Term Outcomes for Economists“). Oyer wonders whether or not initial job placement at a high ranking university affects long-term job prospects. Of course, the problem with this analysis is that graduate students with a lot of talent generally land their initial job at a high-quality institution. How does the author control for this?

Oyer uses the year-to-year fluctuations in demand to compare the first jobs of fledgling economists of equal promise. Imagine two newly minted Ph.D.s who have produced equally important dissertations. Both are on the edge between a good job and a bad one. One finishes her degree in a year when there is strong demand for new faculty. As a result, she gets a good job at a Top 50 university. The other finishes in an off year, when a recession keeps most public universities from hiring. Although equally promising as a scholar and teacher, she starts her career at a more obscure school. Five or 10 years hence, what do the careers of these two young professors look like?

After 1980, job openings for academic economists fell 15 percent and remained low until 1987. At that point, they bounced back, reaching their 1980 level in 1990. After 1990, openings again fell steadily, this time by more than 20 percent, remaining low through 1995. In keeping with the fluctuating market, about 60 percent of boom-year (1980 and 1990) econ graduates found tenure-track first jobs at ranked research institutions, compared with fewer than 40 percent of bust-year (1985) graduates.

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