Following my previous post on China’s higher education boom/bubble, here I share with you another interesting research by Harvard labor economist Richard Freeman on how the global boom of higher education, especially in developing countries, has impacted on the US.

Exhibit 1 (all graphs are taken from Freeman’s NBER working paper) shows country’s share of global college enrollment.

In 2006, the US accounts for 12% of total college enrollment globally. But watch how China and India, the two most populous countries, how their college enrollments have soared over the years. China’s college enrollments rose from 1.7 million in 1980 to 23.4 million in 2006, or 16.5% of the world total.

A lot of college graduates from developing countries, seeking better opportunities, came to the United States. The chart below shows you the major source countries of international students in the US.

In the 2006-07 period, among 580K international students in the US, 2/3 are from Asia; 85% from developing countries: with India supplying the most, nearly 15%; China 12%; South Korea 10%. And nearly half (45%) of international students came to the US to pursue graduate degrees.

A lot of international students went to science & engineering (S&E) field. In 2005, 50.9% of PhD degrees in S&E were granted to foreign-born international students. If we just look at engineering, the number was at startling 69% (I believe the number is about the same in economics).

Focus on China: The number of students who came to the US to study and eventually got their PhD degrees in natural sciences has been rising sharply, especially after 1990s. (see graph below; the following graphs were taken from another NBER research by Bound, Turner & Walsh)

Meanwhile fewer and fewer US-born college graduates went to pursue PhD degrees. This is especially true in life sciences and physical sciences. I am not quite sure how this happened: it could be due to the education problem in US high school system; it could also be higher pay in other sectors, such as financials and investment banking.

But I suspect the surge of foreign PhDs in the US was largely a supply story. Why? The graph below looks at the correlation between the number of Bachelor degree holders and the PhD degrees granted in the US to foreign students. As you can see, there is an obviously strong positive correlation between the two.

Also, we have witnessed a cross-board surge of international students, almost in every field, not only in the science and engineering field.

Now we come to the policy delibrations.

With more and more PhD degrees granted to international students, foreign-born researchers and academics are sure to play a more and more important role in US higher education and research in coming years. A policy question naturally rises as to how to retain these foreign researchers. And what changes in US immigration policy should be in place to acheive the goal?