Can the Job Market for Economists be Improved?

Fedor Iskhakov, Terence Johnson, Soohyung Lee, David McArthur, John Rust, and Joel Watson , Oxford Handbook of Market Design, ed. by Nir Vulkan, Alvin E. Roth, and Zvika Neeman , October 2013.

In this chapter we describe the operation of the job market for PhD economists and an effort to improve the market’s operation via the creation of the non-profit organization (EJM), an online intermediary that serves as an “information clearinghouse” to facilitate the exchange of information between applicants, recommenders, and recruiters. EJM does not attempt to alter the decentralized search and matching process by which the economics job market currently operates. Since there is unrestricted entry of intermediaries similar to EJM and a number of for-profit and non-profit organizations are currently competing in this market in addition to recruiters with their own application systems, we discuss the problem of market fragmentation that can occur when too many organizations attempt to intermediate trade in the market. Contrary to conventional wisdom in industrial organization theory, we show that unrestricted entry and competition of intermediaries can result in suboptimal outcomes. We discuss conditions under which the market might be improved if there is sufficient coordination to promote information sharing, such as establishing a dominant information clearinghouse that operates as a non-profit public service — a role EJM is trying to fulfill. We also consider the benefits and impediments to establishing more ambitious centralized job matching mechanisms, including guided search or price-based alternatives to the current system.