Cyclicality and the Labor Market for Economists

Using a unique sample of new Ph.D. economists in 1987 and 1997, we examine how jobseekers and their employers alter their search strategies in strong versus weak markets. The 1987academic market was strong while the 1997 market was much weaker. A multimarket theory ofoptimal search suggests that job seekers will respond to a weakening market by lowering theirreservation utility. This in turn affects their search strategies at the extensive margin (whichmarkets to enter) and the intensive margin (how many applications to submit per market).Meanwhile, employers respond to the weakening market by raising their hiring standards. Thecombination of strategies on the supply and demand sides suggest that high quality applicantswill obtain an increased share of academic interviews in weak markets while applicants fromweaker schools will increasingly secure interviews outside of the academic market. Empiricalresults show that in the bust market, graduates of elite schools shifted their search strategies toinclude weaker academic institutions, while graduates of lower ranked schools shifted theirapplications away from academia and toward the business sector. In bust conditions, academicinstitutions increasingly concentrate their interviews on elite school graduates, women and U.S.residents.[...]