University policies under varying market conditions: The training of electrical engineers

This paper analyzes the problem faced by a university in optimizing the quality and quantity of engineers in the face of fluctuating enrollment. This problem is embedded within an equilibrium model that considers the dynamic rational occupation choice of high school graduates and the effect of the students and the university decision on the current and future demand and supply of engineers. The explicit considerations lead to an estimable model that is capable of providing economic forecasts of the demand and supply of electrical engineers under various economic conditions. The model is estimated using aggregate data from Israel. The estimated parameters are consistent with the economic theory and fit the sample well. In particular, the model is capable of estimating the observed cyclical movements in the number of graduating electrical engineers in Israel. Finally, we provide several predictions on the equilibrium number of electrical engineers towards the end of the century.