Does hiring faculty members from overseas help reduce student costs at Harvard? That's the view of Professor N. Gregory Mankiw in his New York Times column:
In just the last few weeks, the economics department at Harvard, where I am chairman, has brought in six candidates to be considered for two assistant professor positions. Of the six, three are Americans, one is German, one is Argentine, and one is a New Zealander. The jobs will be offered to those deemed to have most promise as teachers and scholars, regardless of nationality.
The competition from foreign-born economists makes it harder for American economists to get the best positions. But it would be hypocritical for American economists to argue against such competition, as we have long preached that nations are better off over all when they pursue a policy of free and open trade. . . .
This competition from abroad may reduce the salaries of American-born economists like me, but it has improved the university, much to our students' benefit. For one thing, such competition keeps down the university's labor costs. Many parents are shocked at how high college tuition is, but it could be worse.
There are many benefits for Harvard undergraduates from the international recruitment of faculty members, including a diversity of experience and culture necessary in a globalized economy and culture. But does the presence of overseas stars really help hold down their costs, now $54,496 annually?
I'd love to see Professor Mankiw's data. Globalization does tend to reduce pay in some labor markets in which services are more or less commodities. I've also suggested in The Atlantic that international competition thanks in part to computer chess has reduced tournament income of U.S. grandmasters. But the point of the Ivy League and other elite universities is that each is a brand of brands, that ideally each tenured faculty member is one of the top handful of scholars in the world. That can't always be realized. The Ivy choice may be happy at an overseas or (yes) even a U.S. public university, but according to knowledgeable insiders I've known over the years, it's the principle. Last year, Harvard placed at the top the Times (London) Higher Education Supplement world university rankings, and Professor Mankiw and other department heads are doing their best to see that it stays there.
Harvard faculty appointments thus fall into the phenomenon recognized in the last century by the late economist Sherwin Rosen: The Economics of Superstars. Rosen observed how modern media can multiply the range of top performers internationally, so he would not have been surprised that the rise of massive open online courses (MOOCs) are increasing the gap between international recognition and run-of-the-mill excellence.
Thus Harvard is no more reducing its tuition by employing European, Asian, or Latin American scholars than the Metropolitan Opera is holding ticket prices down by hosting the best Italian tenors and Austrian altos. From the beginning, when Hollywood producers hired leading European actors, it was often for starring roles at corresponding pay. A job that can be done anywhere is abundant and therefore cheap. But super-stars are super-scarce, by definition. Globalization tends to make them richer, not more affordable.
Even more than in the arts, it's extremely unlikely that institutions could hire overseas-born economists for less than comparable Americans would get, as there is no discipline with more experience in obtaining salary data or skill in evaluating it.
Professor Mankiw's point was not that overseas professors receive less than others, but that all salaries (including his own) are less because of their presence. So here's an empirical suggestion for some economics graduate student or undergraduate. Get lists of departments, compute the percentage of overseas-born scholars with those from the US, and see how these correlate with published salaries from surveys. I'll be surprised if the relationship isn't positive.