The Impact of New Science and Engineering Graduates on Intrastate Labor Markets

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A major policy issue confronting states is the level of state support to higher education. A crucial question in this policy debate is whether a state's production of college graduates has a proportionate effect on the level of college attainment in the state. Although it is widely accepted that rising college attainment leads to rising prosperity, there is widespread concern that many new college graduates will take their state-supported degrees to labor markets in other states. The belief that state support to higher education subsidizes the workforce development of other states undermines states' incentives to promote wider access to higher education. Moreover, there is some suggestive evidence to support this view. There are compelling reasons, however, to be skeptical of this view and the existing evidence. The proposed study will explore those reasons and develop an appropriate framework to examine the impact of a state's production of college graduates on college attainment in the state. For several reasons, the emphasis will be on science and engineering (S&E) graduates. This study will use this framework and appropriate econometric methods on data from the National Center for Education Statistics' Integrated Postsecondary Education Data System and the Bureau of Labor Statistics' Current Population Survey and Occupational Employment Statistics Survey to quantify the effects of states' production of S&E graduates on state' labor markets. To be more specific, this research will estimate the effects of new S&E graduates in a state on the state's employment and wages of S&E graduates. These estimates will implicitly test alternative views on the nature of job creation for skilled labor. This research will also explore the spillover benefits from new S&E graduates on non-S&E labor markets. That is, this project will estimate the complementary effects of S&E degrees on the wages and employment in labor markets for less-skilled workers and for non-S&E graduates.