The Market for Economics and Finance PhDs

• Published date: 01 June 2023
• Author: Yihui Lan,Ian W. Li,Zong Ken Chai,Kenneth W. Clements
• Date: 01 June 2023
• DOI: http://doi.org/10.1111/1467-8462.12509

The Australian Economic Review, vol. 56, no. 2, pp. 163–191 DOI: 10.1111/1467-8462.12509

Article

The Market for Economics and Finance PhDs

Yihui Lan, Ian W. Li, Zong Ken Chai and Kenneth W. Clements*

Abstract

This paper presents new information about

the post‐graduation activities of those with

a PhD in economics and finance from an

Australian university. Approximately 40

per cent have an academic job, while the

other 60 per cent work elsewhere or engage

in other activities. The analysis includes

origin‒destination networks for both the

academic and non‐academic markets, the

determinants of earnings and measures of

overqualification and underemployment.

The findings of the paper can provide

guidance for those completing or contem-

plating PhD studies.

1. Introduction

The training of PhD students is an important

component of the work of universities.

Much effort is devoted to selecting candidates

for PhD programs, leading academics are

typically involved with supervision, and

emphasis is placed on the creation of high‐

quality theses that lead to publications. PhD

students themselves are usually talented and

motivated to succeed, and can be expected to

excel in their subsequent careers. To a certain

extent, universities can be judged by the

achievements of their PhDs. The post‐

graduation activities of PhDs reflect on the

workings of universities, their role in edu-

cating and nurturing future leaders, and their

efficiency and social value.

This paper investigates the careers of

economics and finance PhD graduates

mostly from Australian universities. The

paper deals with several related issues.

Who are the major employers of PhDs in

economics and finance? What jobs are

available for them in academia, with

government and in the private sector?

What are the hiring practices of universi-

ties? What do they earn? Do they feel

overqualified for the jobs they do? Are they

underemployed?

This paper is related to the literature on

PhD graduate destinations. Seo et al. (2021)

and Li and Horta (2021) analyse factors

influencing PhD students' choice of careers

inside or outside academia. Bryan (2019)

investigates young ‘star’economists in the

United States (US), including their back-

grounds, research fields and the places where

* Kenneth W. Clements: The University of Western

Australia, Western Australia, Australia; email: <Ken.

Clements@uwa.edu.au>. Lan, Chai and Clements are

with the UWA Business School; Li is with the UWA

School of Population and Global Health. For helpful

discussions and comments, we are grateful to Emiliano

Carlevaro, Simon Chang, Shawn Chen, Izan, Alison

Preston, Diana Soetjipto, Rod Tyers and participants at

seminars at ANU and UWA. In revising the paper, we

have benefitted from the comments of Ross Williams, the

Co‐editor and two referees.

© 2023 The Authors. The Australian Economic Review published by John Wiley & Sons Australia, Ltd on behalf of The University of

Melbourne, Melbourne Institute: Applied Economic & Social Research, Faculty of Business and Economics.

This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction

in any medium, provided the original work is properly cited.

these top PhD graduates take jobs. He shows

that a majority of stars work in top US

economic programs, but governments (other

than central banks and the World Bank) hire

no stars and almost no stars go to the private

sector. Siegfried and Stock (1999) and Stock

and Siegfried (2014) document that the

proportion of economist graduates going to

the private sector was about 15–20 per cent.

Oyer (2006) provides evidence that the initial

academic appointments of economics PhDs

have a causal effect on long‐term career

development. Clements and Si (2019) analyse

the careers of all economics PhDs from the

University of Western Australia who gradu-

ated during the period 2001–2015 and find

about 60 per cent entered academia.

Studies on the destinations and employ-

ment outcomes of higher education graduates

have been extensively performed in Australia

and internationally. This reflects the in-

creasing importance of employment outcomes

to individuals interested in higher education

and career prospects, and the public as both

consumers and funders of higher education.

These studies of graduate destinations tend to

focus on bachelor's degree graduates, how-

ever, with studies looking at PhD graduates

being the exception rather than the norm.

Jackson and Michelson's (2015) national

study of the determinants of employment for

Australian PhD graduates, for example, was

one of the few empirical studies of PhD

graduate employment, finding that prior work

experience, study at a research‐intensive

institution and the use of certain job search

strategies is associated with the chances of

full‐time employment.

Studies in this area also tend to have no

particular focus on specific disciplines, with

analyses of graduate outcomes usually being

performed for the graduate cohort en masse,

albeit with comparative analyses across fields

of study and findings that field of study is one

of the most important drivers of graduate

outcomes (Li and Miller, 2013). Given the

existence of large, national and rich datasets

on graduate employment in Australia and

elsewhere, such as the United Kingdom and

New Zealand, this presents opportunities for

the exploration of graduate outcomes for PhD

degree holders in specificfields such as

economics.

In this paper, we use two datasets to

investigate careers of economics and finance

PhD graduates, and labour market outcomes,

respectively. The next section provides a

description of the first dataset we use, the

post‐graduation activities of those who pre-

sented at the PhD Conference in Economics

and Business. Section 3 examines the work-

ings of the academic job market via the flows

of individuals from the PhD‐awarding uni-

versity to the university where they currently

work. Section 4 discusses careers of the large

number of PhDs now in government and

business. The Graduate Outcomes Survey

(GOS), a rich source of information, is used

as our second dataset in Section 5 to analyse

PhD graduates' earnings and occupations.

Section 6 investigates the extent to which

PhDs perceive they are overqualified or

underemployed for the jobs they do.

Section 7 is a discussion of the challenges

faced by Australian PhD students. Section 8

contains some concluding comments.

2. The Supply of PhDs

How big is the ‘PhD business’? Using data

from the Department of Education, Skills and

Employment (DESE), Figure 1 shows the

number of completions of PhD degrees in

economics and finance in Australia. Over the

last 20 years, the production of PhDs has

approximately doubled (a growth rate of about

3.5 per cent per annum) and peaked recently

around 150 per annum, while the fraction of

females undertaking PhDs has risen modestly

to about 40 per cent. Approximately half of

economics PhDs were overseas students,

while 40 per cent of finance PhDs were

overseas students. In the case of finance PhDs,

however, there was markedly stronger in-

creases in the proportion of overseas students

from 29 per cent in 2004 to 59 per cent in

2018, while the proportion of overseas

economics PhDs grew from 42 to 51 per

cent over the same period.

1

164 The Australian Economic Review June 2023

© 2023 The Authors. The Australian Economic Review published by John Wiley & Sons Australia, Ltd on behalf of The

University of Melbourne, Melbourne Institute: Applied Economic & Social Research, Faculty of Business and Economics.