Several researchers have recently pointed at an evolution in the research productivity in top economics departments over the past few decades. Kim, Morse and Zingales (2006) find that in the 1970s belonging to an elite university had a sizeable impact on individual productivity, while this effect had disappeared in the 1990s. They attribute this change to advances in information technology, namely the internet revolution, that make physical proximity less important. They also link the observed increase in coauthorship between scholars at elite and other universities to the same factor. Ellison (2007) documents a decline in the fraction of papers in top economics journals written by economists from top universities. His explanation is again the impact of the internet, since new technologies can enhance the ability of top authors to disseminate their research without going through the traditional peer-review process. While new technologies have certainly played a role in these transformations, other factors are at least as important. I am referring in particular to the stock market crash of 1988. The impact of the crash on the academic job market in economics was dramatic. Figure 1 in Oyer (2006) documents the persistent decline in job openings that followed. It took more than ten years for the number of academic listings in JOE to go back to the pre-crash level. Let me try to explain, partly on the basis on anecdotal personal experience (I was on the market out of Penn in 1987-88), what was the effect of the squeeze on recruiting. Until then, the academic job market was heavily segmented by quality. Students out of the top, say, five schools easily found jobs in other top five schools. After the crash, however, even the best students from the top five had to accept jobs in lower-rank US universities, or even abroad. In fact, a side effect was the globalization of the market. Until then, the academic job market was a purely US affair and very few foreign schools interviewed at the meetings, while after the crash foreign universities took advantage of the excess supply, and very quickly the job market became global. For example, while in 1988 Brown managed to hire me from Penn (then a top ten), soon enough it could afford to hire from Harvard. In short, the set of destinations of top PdDs widened, thus making the quality of junior faculties more homogeneous within a group of universities that were previously much more differentiated. This also implied stronger connections across the same universities, stemming out of contacts developed in graduate school. The resulting increase in coautorship reinforced the process. The transformations I have described were sizeable and had a lasting influence. They can explain the decline of the impact on individual productivity of residence in an elite university, and also the relative decline in productivity of top universities, due to the absolute improvement of lesser universities. Of course, communication technology greatly facilitated these events, but my impression is that it was not their primary cause. The primary cause was the external shock of 1988.
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