Supply, Demand and Foreign Students

March 25, 2009

The fact that large numbers of international students enroll in doctoral programs in the United States is no surprise, but their considerable presence represents “one of the most significant transformations in U.S. graduate education” in the last quarter century, argues a new economic analysis of the supply and demand effects influencing student outflows from other countries and influxes into the United States. The proportion of foreign-born Ph.D. recipients in science and engineering nearly doubled from 27 percent in 1973 to 51 percent in 2003.

“When we look at those trends in terms of Ph.D.'s going to U.S.-born people or people born in foreign countries, I think the most important takeaway is that it’s not all about us,” said Patrick Walsh, an assistant professor of economics at Saint Michael’s College and one of three co-authors of "Internationalization of U.S. Doctorate Education," a working paper published by the National Bureau of Economic Research (John Bound, of the University of Michigan, and Sarah Turner, of the University of Virginia, were the other two authors).

“People will look at trends and say, 'Wow, there are a lot more Ph.D.'s going to foreigners. There are relatively fewer Ph.D.'s going to American citizens.' I think one of the conclusions that some people jump to is that there’s something wrong with the U.S. -- we’re falling behind. I think the main takeaway with the paper is that these trends have as much to do or maybe more to do with what’s going on in other countries as they do with what’s going on in the United States," Walsh said.

In other words, the paper states, “In motivating this analysis, we note that it is not uncommon to find rhetoric suggesting that the relative erosion in the quality of education afforded to young people in the U.S. is a primary cause of the decline in share of doctorate degrees in science and engineering awarded to U.S. students. Our interpretation of the available evidence is that such claims have little empirical basis. Natural economic forces of supply and demand, with these effects varying considerably in magnitude across countries, go a significant distance in explaining the observed changes in doctorate receipt among students from abroad and the U.S.”

The paper describes a number of such explanations, including the demand generated by increased bachelor’s degree attainment in other countries, some with still-developing higher education systems. Authors also note demand shifts attributable to changing political circumstances (including, notably, the normalization of relations with China, now the second-largest country of origin for international students).

Meanwhile, the size of the college-aged population in the U.S. peaked in the mid-1970s and declined through the early '90s. So while the fraction obtaining undergraduate degrees in science and engineering rose by about 2 percent a year in the 1980s and early '90s, according to the paper, the raw number of science and engineering B.A.'s barely budged.

On the supply side, the working paper describes increased federal research funding for the physical and health sciences in the 1980s as fueling expansions in programs. Researchers did not find evidence of a direct “crowding out” of U.S.-born students, with much of the growth in foreign enrollments being absorbed by the expanding but less highly-ranked programs.

"One senior physicist," the paper notes, "described how the influx of Chinese students at his research university met a need and allowed the department to expand, as funding for physics remained glowing in the 1980s with the persistence of Cold War federal funding. At the same time the number of undergraduates from the U.S. obtaining degrees in the physical and life sciences was stagnate or declining and the size of college age population in the U.S. was declining."

The paper does note, however, that salaries for early-career scientists with Ph.D.'s have increased more slowly than those of the college-educated population more generally.

“We’ve got this surge of basically new Ph.D.'s in the labor markets and it looks like that has had some effect on not necessarily lowering salaries but in salaries growing at a lower rate than they would have otherwise,” said Walsh. “And that can lead back to B.A. production in the United States. If the salaries for scientists and engineers with Ph.D.'s are not growing as quickly because there has been an influx in foreign Ph.D.'s, then students who might be kind of on the margin ... could decide, 'I’m not going to do the bachelor’s in science or engineering.' ”

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