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Rationality and the Decision to Invest in Economics

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  • Dennis L. Hoffman
  • Stuart A. Low

Abstract

In the study reported here, we develop a theoretical model of occupational choice which is then specifically tailored to fit the market for economists over time. Economists typically assume that the world is relatively free of informational barriers and that agents carefully process vast amounts of information in making decisions. This study reveals whether economists' own occupational decisions are consistent with this world of rational, calculating agents. Results suggest that tests for the internal consistency of rational expectations and our model of occupational choice cannot be rejected, while the model provides a better explanation of the observed pattern of enrollments than does an alternative that assumes agents naively base decisions only on current wage conditions.

Suggested Citation

  • Dennis L. Hoffman & Stuart A. Low, 1983. "Rationality and the Decision to Invest in Economics," Journal of Human Resources, University of Wisconsin Press, vol. 18(4), pages 480-496.
    • Handle: RePEc:uwp:jhriss:v:18:y:1983:i:4:p:480-496
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    Cited by:

    1. Felderer, Bernhard & Drost, André, 2000. "Cyclical Occupational Choice in a Model with Rational Wage Expectations and Perfect Occupational Mobility," Economics Series 81, Institute for Advanced Studies.
    2. Michael Baker & Gary Solon, 2003. "Earnings Dynamics and Inequality among Canadian Men, 1976-1992: Evidence from Longitudinal Income Tax Records," Journal of Labor Economics, University of Chicago Press, vol. 21(2), pages 267-288, April.
    3. Ronald G. Ehrenberg, 2002. "Studying Ourselves: The Academic Labor Market," NBER Working Papers 8965, National Bureau of Economic Research, Inc.
    4. Huffman, Wallace E. & Orazem, Peter, 1985. "The Market for New Ph.D. Agricultural Economists," 1985 Annual Meeting, August 4-7, Ames, Iowa 278607, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Huffman, Wallace E. & Connor, Larry J., 1986. "A Perspective on the Market for Agricultural Economists: Background, Trends, and Issues," ISU General Staff Papers 198607010700001498, Iowa State University, Department of Economics.

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