HRSDC-IC-SSHRC Skills Research Initiative

Working Paper Series

Enrollment Responses to Labour Market Conditions: A Study of the Canadian Market for Scientists and Engineers
by Sumon Majumdar and Katsumi Shimotsu.

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Abstract

As Canada increasingly structures itself towards a “knowledge based economy”, the supply of high-skilled professionals such as engineers and other science graduates acquires more importance. Following the theoretical framework developed by Rosen and Ryoo (2004), we develop and estimate a dynamic supply and demand model for engineers and scientists in Canada. We find that the estimated stock-flow dynamics are supportive of the theoretical model. The relative employment of engineers is quite sensitive to research and development (R&D;) expenditures as a fraction of GDP, particularly after 1997. We then use the estimates to develop a dynamic impulse response function. Looking at the impact of a permanent increase in allocation towards R&D;, we find that the adjustment process is relatively smooth and the market adjusts in about 2 to 8 years (plus the four years of natural lag in production) to within 80% of the final steady state. For a one-time improvement in R&D; allocation, we find that under rational expectations, there is an initial increase in the number of science graduates, but then it falls to below the steady state value and remains there for a long period as the initial increase works its way through the market.