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Choosing the Field of Study in Post-Secondary Education: Do Expected Earnings Matter?

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Author Info

  • Beffy, Magali

    ()
    (CREST-INSEE)

  • Fougère, Denis

    ()
    (CREST)

  • Maurel, Arnaud

    ()
    (Duke University)

Abstract

This paper examines the determinants of the choice of the major when the length of studies is uncertain, by using a framework in which students entering post-secondary education are assumed to anticipate their future earnings. For that purpose, we use French data coming from the 1992 and 1998 Génération surveys collected by the Centre d'Etudes et de Recherches sur l'Emploi et les Qualifications (CEREQ, Marseille). Our econometric approach is based on a semi-structural three-equations model, which is identified thanks to some exclusion restrictions. We exploit in particular exogenous variations in the earnings returns associated with the majors across the business cycle, in order to identify the causal effect of expected earnings on the probability of choosing a given major. Relying on a three-component mixture distribution, we account for correlation between the unobserved individual-specific terms affecting the preferences for the majors, the unobserved individual-specific factors entering the equation determining the length of studies within each major, and that affecting the labor market earnings equation. Following Arcidiacono and Jones (2003), we use the EM algorithm with a sequential maximization step to produce consistent parameter estimates. Simulating for each given major a 10 percent increase in the expected earnings suggests that expected earnings have a statistically significant but quantitatively small impact on the allocation of students across majors.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4127.

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Length: 39 pages
Date of creation: Apr 2009
Date of revision:
Publication status: published in: Review of Economics and Statistics, 2012, 94 (1), 334–347
Handle: RePEc:iza:izadps:dp4127

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Keywords: major choice; post-secondary education; EM algorithm; returns to education;

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References

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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Expected earnings do not matter for post-secondary studies
    by Economic Logician in Economic Logic on 2009-06-15 09:50:00
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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Cited by:
  1. Tacsir, Ezequiel, 2010. "Choosing a career in Science and Technology," MERIT Working Papers, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT) 014, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  2. Liu, Kai & Salvanes, Kjell G. & Sørensen, Erik Ø., 2012. "Good Skills in Bad Times: Cyclical Skill Mismatch and the Long-term Effects of Graduating in a Recession," Discussion Paper Series in Economics, Department of Economics, Norwegian School of Economics 16/2012, Department of Economics, Norwegian School of Economics.
  3. Alena Bičáková & Štěpán Jurajda, 2014. "The Quiet Revolution and the Family: Gender Composition of Tertiary Education and Early Fertility Patterns," Discussion Papers, Central European Labour Studies Institute (CELSI) 22, Central European Labour Studies Institute (CELSI).
  4. Legge, Stefan & Schmid, Lukas, 2013. "Rankings, Random Successes, and Individual Performance," Economics Working Paper Series, University of St. Gallen, School of Economics and Political Science 1340, University of St. Gallen, School of Economics and Political Science.
  5. Matthew Wiswall & Basit Zafar, 2011. "Determinants of college major choice: identification using an information experiment," Staff Reports, Federal Reserve Bank of New York 500, Federal Reserve Bank of New York.
  6. Stefanescu, Razvan & Dumitriu, Ramona & Nistor, Costel, 2011. "Motivations for the Bessarabian youth to study in Romanian universities," MPRA Paper 41621, University Library of Munich, Germany, revised 02 Oct 2011.
  7. Ronni Pavan & Josh Kinsler, 2012. "The Specificity of General Human Capital: Evidence from College Major Choice," 2012 Meeting Papers, Society for Economic Dynamics 1036, Society for Economic Dynamics.
  8. D’Haultfœuille, Xavier & Maurel, Arnaud, 2013. "Inference on an extended Roy model, with an application to schooling decisions in France," Journal of Econometrics, Elsevier, Elsevier, vol. 174(2), pages 95-106.
  9. Tacsir, Ezequiel, 2009. "Elección de ocupación: factores personales y aspectos sociales
    [Occupation Choice: Personal factors and Social Aspects]
    ," MPRA Paper 20432, University Library of Munich, Germany.
  10. Matthew Wiswall & Basit Zafar, 2011. "Belief updating among college students: evidence from experimental variation in information," Staff Reports, Federal Reserve Bank of New York 516, Federal Reserve Bank of New York.
  11. Aitor Lacuesta & Sergio Puente & Ernesto Villanueva, 2011. "The schooling response to a sustained increase in low-skill wages: evidence from Spain 1989-2009," Banco de Espa�a Working Papers, Banco de Espa�a 1208, Banco de Espa�a.
  12. Tacsir, Ezequiel, 2010. "Occupation Choice: Family, Social and Market Influences," MERIT Working Papers, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT) 013, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  13. Peter Arcidiacono & Paul B. Ellickson, 2011. "Practical Methods for Estimation of Dynamic Discrete Choice Models," Annual Review of Economics, Annual Reviews, Annual Reviews, vol. 3(1), pages 363-394, 09.
  14. Sjoquist, David L. & Winters, John V., 2013. "State Merit-Aid Programs and College Major: A Focus on STEM," IZA Discussion Papers 7381, Institute for the Study of Labor (IZA).
  15. Borghans, Lex & Golsteyn, Bart H.H. & Stenberg, Anders, 2013. "Does Expert Advice Improve Educational Choice?," IZA Discussion Papers 7649, Institute for the Study of Labor (IZA).
  16. Suttner, Johannes R., 2014. "Sensitivity of economists during market allocation," CIW Discussion Papers, University of Münster, Center for Interdisciplinary Economics (CIW) 3/2014, University of Münster, Center for Interdisciplinary Economics (CIW).
  17. Tuomo Suhonen, 2012. "The role of distances and parents’ educational background in university field of study choice," ERSA conference papers ersa12p751, European Regional Science Association.
  18. Bradley, Elizabeth S., 2012. "The Effect of the Business Cycle on Freshman Major Choice," MPRA Paper 42412, University Library of Munich, Germany.

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