Nova workboard

a blog from young economists at Nova SBE

Return and Productivity of PhDs in Economics

In most countries a PhD is a basic requirement for a career as a researcher. But, is there any evidence that PhD graduating institutions produces “stars”, i.e. successful researchers in the sense that they are productive?

First, it is important to think about the monetary impact of having a PhD. Does a PhD improve earnings? The value of education qualifications concentrates upon the “premium” the qualification offers to the individual that possesses it. There is evidence that the “graduate premium” (i.e. the difference over the working lifetime of the earnings of a graduate relative to a person who could have but did not study) is positive and significant. In terms of a PhD, a study showed that the premium is higher when compared to the master’s premium. While men with a master earn generally more than the base and women with a master earn also more, a PhD increases this gap even more for both men and women. However, it is striking that there is a decline in the return (see Table 1). For both men and women the difference between the master’s premium and PhD premium is small. Yet, the premium will also depend on the subject of study (as shown in Table 1). Since, the objective of this analysis is to think about the productivity of PhDs in Economics, it is relevant to focus on the social science outcomes in the Table 1. Hence, the outcomes for social science tell us that earnings seem not to increase when a person has a PhD. A reason for this result is suggested in the above mentioned paper:

“among graduates with good degrees of the characteristics that incline someone to go into postgraduate work may well be ones which would make that person less attractive to a potential non-academic employer [so that] someone who goes on to postgraduate study…improves his own employability and likely income even though these remain below employability and likely income of those good graduates who have no wish to go on to postgraduate study”.

earnings premia

Thus, when considering doing a PhD, for instance, in Economics the individual should not take the average effects on earnings into account for his or her decision.

Regarding the outcomes in productivity when holding a PhD in Economics, the outcomes are interesting. According to a paper, which uses data from people who received an Economics PhD from 154 American and Canadian institutions between 1986 and 2000 and a database of academic papers published between 1985 and 2006, the conclusion is that “If the objective of graduate training in top-ranked departments is to produce successful research economists, then these graduate programs are largely failing”. The reason is that only few individuals holding a PhD are producing a “credible” number of papers by their sixth year after graduation. What is a “credible” number? Commonly it is said that “quantity does not reflect quality”. And so, the authors used an index that adjusts the number of publications by the quality of the journal it appears in. They created an “AER equivalent” meaning that other journals are indexed in relation to the American Economic Review. For instance, five papers in the Economic Journal are equivalent to one paper in the American Economic Review. In fact, what they concluded was that, as expected, graduates from the top universities can be extremely productive producing over 4 AER-equivalent papers over six years. However, the great majority of PhD students, even at top universities, produce much less than 4 AER-equivalent papers.


So, what is the reason for successful PhD applicants that studied in the best institutions to have low performance as researchers? The authors of the paper suggest 3 reasons for this. First, to be a good researcher grades are not enough. They point out the need to have attributes such as creativity or the aptitude for academic networking. Second, there might be “a virtuous circle in professional success”, i.e. if a graduate manages to get a good first job where he has a good mentor and possibilities to publish then he will probably have more papers published by good journals in the future. The last reason is that top students may receive more attention from the faculty and consequently may have better projects. These students will in turn work harder to preserve their position in the future.

As a conclusion, we may say that top institutions are able to produce “stars” but the productivity of a PhD student will depend on many factors such as luck! So, looking only at the number of papers published may not be enough to draw conclusion about productivity.



Author: studentnovasbe

Master student in Nova Sbe

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