Research and higher education in economics: Can we deliver the Lisbon objectives

Can European economics become “the most dynamic and competitive in the world”? Using readily accessible data, this paper documents the following aspects. (i) Today, the United States outperforms Europe by a factor of the order of 3, with no clear trend; the Lisbon goal is not in sight. (ii) Europe is not homogeneous; the United Kingdom and the small countries in north central Europe significantly outperform the Big 4 continental countries (France, Germany, Italy, Spain); we conclude that the Big 4 should accept English as the lingua franca of economics and implement major institutional reforms. (iii) Some 35 leading economics departments (a dozen from each of these three areas) account for 75 % of Europe’s research output. (iv) The concen-tration of research in leading departments is substantial but not exclusive; it is comparable in Europe and the United States, but leading U.S. departments have incomparably more resources and also benefit from access to an integrated labor market. (v) Few PhD programs are of effi-cient size, especially in Europe, so further concentration is needed. (vi) Second-best funding of higher education calls for block grants to efficient programs; in Europe, these should be organized at the EU level. We conclude with a modest proposal (e15 million per year) consist-ing of block grants to leading departments and to young academic researchers. Our optimistic verdict is that substantial progress toward the Lisbon goal is in sight, but it requires significant departures from current practices. (JEL: I21, I23) 1