We assess the likelihood that earnings premiums influence college students' behavior as human capital theory suggests. We highlight several key observable patterns of earnings by age, sex, and for numerous college majors in recent decades, and propose a model of heterogeneous human capital to explain the data. Next, we formulate and test the hypothesis that greater expected average annual earnings by college major will induce greater proportions of college students to select higher-paying majors. The evidence implies that - at least for the observed range of earnings premiums - monetary incentives are insufficient to fully explain behavior.
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Paper provided by Elon University, Department of Economics in its series Working Papers with number
2009-01.