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My university is offering a "designated emphasis" in a topic area, that grad students can add to their transcript. I think that the idea is that it can provide some sort of signal that the student has a competency in this area, like a minor for an undergrad.

Has anyone else ever heard of such a thing? What possible practical use could it be to the students getting it? Why might the idea have been conceived of?

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Something like this is actually very common in some fields. Economics programs usually have a requirement called "Specialization Fields," "Major Fields," "Field Certification," or something like that (some example requirements).

They usually consist of a couple courses in the same area, as well as often an additional field exam covering topics from those courses. Glancing over some requirements, most programs require you to finish ~2 or these as a requirement for getting your PhD, either equally or as a major/minor setup. As you might expect, almost all students do these in fields that they are interested in and will eventually do research in.

As for purpose, I believe that they are mostly used as a signaling and filtering device for the job market. If you look at any department's list of job market candidates, you can see that the specialization fields are very prominently displayed. I think the importance of these is probably linked to some of the idiosyncrasies of the econ job market, such as its degree of centralization, but that's just my speculation.

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