Michael Kaganovich

Grade-compensating differentials in the competition between college majors

In a recently completed paper, Michael Kaganovich focused on a related topic concerning student choices of a field of study. Specifically, he analyzed the phenomenon of “grade inflation” in the context of strategic interaction between departments of a university as they compete for students in the intra-university marketplace. Mr Kaganovich examines the factors that contribute to students’ choices of the fields of study and the policies of departments, such as changes in curricular and grading standards, aimed at attracting and retaining appropriately prepared students. The paper establishes a relationship between the levels of grade inflation characterizing different majors and the job market returns they offer. In particular, a widening salary differential between majors in the job market will drive a less lucrative major to compensate by lowering its grading standards, i.e., engaging in “grade inflation”.

Mr Kaganovich’s recent research focuses on the economics of higher education as an increasingly complex marketplace. As growing shares of high school graduates now pursue higher education, a key determinant in career success has shifted from the decision to go to college to the choice of a field of study in college. Indeed, while the average college premium stagnated in recent decades, the dispersion between major-specific expected career earnings has grown dramatically, with the increasing premia enjoyed by the graduates in STEM related fields in particular. This is the point of departure for the project Mr Kaganovich is pursuing jointly with the ifo Institute’s Volker Meier, which they plan to advance during his visit. Specifically, the project aims to address the apparent puzzle of a sluggish response in supply of STEM graduates as a share of all college graduates, despite the increasing earnings gap.

Michael Kaganovich’s primary research and teaching interests are in the models and methods of growth theory, as well as their applications. They include growth models with human capital, public programs and inter-generational transfers, models of educational systems, as well as the issues in economics of transition and economics of the environment and natural resources.

Michael Kaganovich is Professor of Economics at Indiana University and Fellow of the CESifo Research Network. He has published papers in the Review of Economic Studies, Economic Theory, European Economic Review, International Economic Review, Journal of Public Economics, Economics Letters, Journal of Economic Behavior and Organization, Journal of Economic Dynamics and Control and Journal of Comparative Economics. Mr Kaganovich is an Associate Editor of the Journal of Public Economic Theory. He received his PhD from the Academy of Sciences in Moscow in 1985.