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The choice of major: effects on wages and an evaluatio of the no-switching majors rule

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  • Daniel dos Santos
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    Abstract

    I estimate a dynamic discrete choice model of the decision of going to college in a speci?c major. Dynamics in the model result from a correlated bayesian learning structure about individual comparative advantages in the labor mar- ket, which allows me to decompose the income gains associated to college ed- ucation into three components: (i) human capital accumulation, (ii) access to specialized segments of the labor market, and (iii) better exploration of com- parative advantages due to the use of information acquired in college. The estimation suggests scienti?c majors are especially bene?tted from (ii) whereas in non-scienti?c occupations the e¤ect (i) dominates. I then use the estimated structural parameters to simulate the impact of restrictions to changes of major during college, a policy commonly found outside North America. The results suggest that if American students were not allowed to switch majors, they would have welfare losses equivalent to their ?rst year of labor income after college.

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    Bibliographic Info

    Paper provided by Universidade de São Paulo, Faculdade de Economia, Administração e Contabilidade de Ribeirão Preto in its series Working Papers with number 09_06.

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    Handle: RePEc:fea:wpaper:09_06

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    1. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-90, October.
    2. Yoram Ben-Porath, 1967. "The Production of Human Capital and the Life Cycle of Earnings," Journal of Political Economy, University of Chicago Press, vol. 75, pages 352.
    3. Susumu Imai & Neelam Jain, 2005. "Bayesian Estimation of Dynamic Discrete Choice Models," 2005 Meeting Papers 432, Society for Economic Dynamics.
    4. Arcidiacono, Peter, 2004. "Ability sorting and the returns to college major," Journal of Econometrics, Elsevier, vol. 121(1-2), pages 343-375.
    5. Keane, Michael P & Wolpin, Kenneth I, 1994. "The Solution and Estimation of Discrete Choice Dynamic Programming Models by Simulation and Interpolation: Monte Carlo Evidence," The Review of Economics and Statistics, MIT Press, vol. 76(4), pages 648-72, November.
    6. Rust, John, 1987. "Optimal Replacement of GMC Bus Engines: An Empirical Model of Harold Zurcher," Econometrica, Econometric Society, vol. 55(5), pages 999-1033, September.
    7. Stephen V. Cameron & James J. Heckman, 1998. "Life Cycle Schooling and Dynamic Selection Bias: Models and Evidence for Five Cohorts of American Males," Journal of Political Economy, University of Chicago Press, vol. 106(2), pages 262-333, April.
    8. Jacob Mincer, 1958. "Investment in Human Capital and Personal Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 66, pages 281.
    9. Miller, Robert A, 1984. "Job Matching and Occupational Choice," Journal of Political Economy, University of Chicago Press, vol. 92(6), pages 1086-120, December.
    10. Cunha, Flavio & Heckman, James & Navarro, Salvador, 2004. "Separating uncertainty from heterogeneity in life cycle earnings," Working Paper Series 2005:6, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    11. Hotz, V Joseph & Miller, Robert A, 1993. "Conditional Choice Probabilities and the Estimation of Dynamic Models," Review of Economic Studies, Wiley Blackwell, vol. 60(3), pages 497-529, July.
    12. Andriy Norets, 2009. "Inference in Dynamic Discrete Choice Models With Serially orrelated Unobserved State Variables," Econometrica, Econometric Society, vol. 77(5), pages 1665-1682, 09.
    13. Willis, Robert J & Rosen, Sherwin, 1979. "Education and Self-Selection," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages S7-36, October.
    14. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," Journal of Political Economy, University of Chicago Press, vol. 70, pages 9.
    15. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4 National Bureau of Economic Research, Inc.
    16. Neal, Derek, 1999. "The Complexity of Job Mobility among Young Men," Journal of Labor Economics, University of Chicago Press, vol. 17(2), pages 237-61, April.
    17. Stephen V. Cameron & James J. Heckman, 2001. "The Dynamics of Educational Attainment for Black, Hispanic, and White Males," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 455-499, June.
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