Should the government subsidise supply or demand Should the government subsidise supply or demand in the market for scientists and engineers?in the market for scientists and engineers?

Carlos Chambel

Hugo Valente

Pedro Nazareth

Paul M. Romer – Working Paper 7723 (NBER)

S & T Policy

MSc in Engineering Policy and Management of Technology

Should the government subsidise supply or demand Should the government subsidise supply or demand in the market for scientists and engineers?in the market for scientists and engineers?

This paper suggests :

The innovation policy in the US has erred.

The existing institutional arrangements in higher education limit supply.

Specific programs that could increase supply.

Should the government subsidise supply or demand Should the government subsidise supply or demand in the market for scientists and engineers?in the market for scientists and engineers?

Why is the innovation policy so important?

Contributes for the technological progress

Increases the trend rate of growth output

Increases the standards of living and wealth

Should the government subsidise supply or demand Should the government subsidise supply or demand in the market for scientists and engineers?in the market for scientists and engineers?

US income per capita = 1.8% / yearBritain income per capita = 1.3% / year

Sweden income per capita = 3% / year

Should the government subsidise supply or demand Should the government subsidise supply or demand in the market for scientists and engineers?in the market for scientists and engineers?

M. Sc. Engineering Policy and Technology Management

E = N * W

Tax advantages, credit, cash payments…

… an additional dollar in subsidies does not translate into much additional private

spending on R&D

People are not the only input !

Subsidy for purchase eqp used in R&D would be less costly than one that is based on total expenditures including salaries!

The demand / supply equilibrium

Should the government subsidise supply or demand Should the government subsidise supply or demand in the market for scientists and engineers?in the market for scientists and engineers?

Where have the scientists gone?

Despite increased spending on research and development the USA is producing fewer and fewer scientists!

Should the government subsidise supply or demand Should the government subsidise supply or demand in the market for scientists and engineers?in the market for scientists and engineers?

The supplysystem

30%-40%30%-40%

Should the government subsidise supply or demand Should the government subsidise supply or demand in the market for scientists and engineers?in the market for scientists and engineers?

The supply of Undergraduate Degrees

Educational institutions provide too little information about prospective benefits of being scientists.

Undergraduate institutions make getting an engineer degree harder, because they cannot expand their engineering departments due to university politics.

Because of this, only half of aspiring engineers attain a degree.

Should the government subsidise supply or demand Should the government subsidise supply or demand in the market for scientists and engineers?in the market for scientists and engineers?

The supply of Ph.D. Degrees in Science & Engineering

The fact: The supply increase in the 1990s of Ph.D. degrees in Science & Engineering has been accompanied by generally declining job prospects for degree recipients

-It helps to explain why undergraduate students did not pursue degrees in some sciences (e.g. Natural Sciences)

-Still, the need to explain the absence of an increase in undergraduate degrees in engineering or other sciences where job prospects for Ph.D. have remained strong

The Critical Issue: The need to understand the market for Ph.D. in order to formulate policies concerning the supply of scientist & engineers (independently of its influence on undergraduate programs)

Should the government subsidise supply or demand Should the government subsidise supply or demand in the market for scientists and engineers?in the market for scientists and engineers?

The Market:

A major part of the graduated flow…

The Challenge: Increase the Ph.D.students fraction that can put their skills to work in the private sector

-During the 1980s the number of Ph.D. recipients (supply) in the U.S. increased

-Most of the students planned to pursue academic research appointments, butthe number of people holding faculty positions remained roughly constant

Increased Ph.D. subsidizing contributed for a steadily worsening academic job prospects

Should the government subsidise supply or demand Should the government subsidise supply or demand in the market for scientists and engineers?in the market for scientists and engineers?

An interpretation of the evidence:

-Undergraduate inst. are a critical bottleneck in the training of scientists & engineers

MSc. in engineering have shown steadily growth while undergraduate programs have not)

-Selection method that attracts people with this taste in Ph.D.

-Ph.D. training that cultivates this taste (or both)

-Graduate schools produce people trained only for employment in academic inst. as a side effect of the production of basic research results

Evidence about Ph.D. preferences for engaging in activities in science despite salary reduction

-Information concerning quality of education and job prospects

-Some internal aspects of the inst. (different departments revenues might promote graduate instead of undergraduate training

Should the government subsidise supply or demand Should the government subsidise supply or demand in the market for scientists and engineers?in the market for scientists and engineers?

Discussion

-Situation in Portugal: NSE versus non NSE (particularly case of private education increasing).

-Job prospects for the Portuguese Graduate students: Is the share graduate students in academic jobs increasing? Is this according with the Portuguese growth policy?

Learning from the US experience: