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Authors:

• Jaewoo RYOO
  Kookmin University

• Sherwin ROSEN
  University of Chicago

This paper developes a generic dynamic, supply-and-demand model of occupational choice and applies it to the engineering profession. The model proves to be largely successful in helping to understand the empirical data in the engineering labor market in the U .S. The major empirical finding is that the engineering market responds strongly to economic forces. It is very clearly revealed that the demand for engineers responds to the price of engineering services and demand shifters. More importantly, supply and enrollment decisions are remarkably sensitive to career prospects in engineering. Also shown is that a rational type model, in which students use at least some forward-looking elements to forecast future demand for engineers, fits the data reasonably well. These findings suggest that arguments for substantial subsidies just to build technical talent ahead of demand are misplaced unless public policy makers have better information on future market conditions than the market participants themselves.