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Universities stand to benefit in recessions, new research shows

Graduates_140pNew research from the London School of Economics and Political Science shows that universities across the world actually benefit during recessions, wielding far greater recruiting power to attract talented graduates compared to the private sector.

In tough financial times the stability of the academic world wins out over the boom-and-bust cycle of the private sector, according to the latest evidence.

Economist Dr Michael Boehm from LSE’s Centre for Economic Performance and Bonn University, said not only do universities wield more recruiting power in a recession, but the young graduates they attract are highly talented and more productive over many years.

“Their productivity is substantially higher than in boom times, a fact attributed to the stiff competition for jobs and a need to prove themselves,” Dr Boehm said.

Michael-Boehm_originalDr Boehm, a recent graduate himself, looked at data from the top 30 universities in the United States over a 40-year period, from 1955 to 1994.

He found that economists starting or graduating from their PhD in a recession were significantly more productive over the long term than economists starting or graduating in a boom.

While the study was confined to the US and to economics graduates, Dr Boehm said the results would “most likely” apply worldwide and to a range of other professions, with the public sector benefitting alongside universities.

“There is already a lot of evidence out there to show that if you start your career in a recession it can have an ongoing effect for many years. Many people who enter the private sector after graduating can expect to earn a lot less for at least a decade,” he said.

“The academic sector is more stable during a recession – certainly in terms of job security – and there is no real noticeable drop in salaries, unlike the private sector.”

The data shows that recession cohorts produce a lot more research, even 15 years after graduation.

Dr Boehm said the findings demonstrate that recessions change the composition of talent across sectors, influencing long-term productivity and output.

For more information contact Dr Michael Boehm at michael.boehm1@gmail.com,  +49 (0) 228 739 208 or Candy Gibson, LSE Press Office, +44 (0) 207 955 7440.

Notes for editors

Dr Michael Boehm graduated from the London School of Economics and Political Science in 2013. His PhD thesis, Three essays on the allocation of talent, investigated the causes and effects of the allocation of workers into occupations, sectors and locations. He is an Assistant Professor at Bonn University, an associate at the Centre for Economic Performance's Labour Markets Programme, and a visiting researcher at the Swedish House of Finance.

The paper can be accessed at: http://etheses.lse.ac.uk/710/

13 February 2014