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Social Approval and Occupational Choice

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  • Anandi Mani

    ()
    (Department of Economics, Vanderbilt University)

  • Charles H. Mullin

    ()
    (Department of Economics, Vanderbilt University)

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    Abstract

    We examine the impact of a desire for social approval on education and occupation choice and model the endogenous determination of perceptions that influence such approval. In a two-sector overlapping generations framework, agents born with ability endowments in both occupations must choose one as their career. An agent's choice is influenced by social approval, which depends upon the community's perception of her ability in her chosen career. The accuracy of a community's perception increases with the fraction of its members performing similar work, because it is easier to assess ability in one's own profession. With positive correlation in skills, the desire for social approval, combined with imperfect assessment of ability, leads to multiple steady states. In all steady states there is overcrowding in the favorably perceived occupation, with misallocation across both occupations. Which sector becomes the favorable occupation depends on the initial occupational composition in the community. When skill distributions differ across sectors, positive correlation in skills can result in a low-education trap as described by Wilson(1987) -- i.e. the entire community opts for the low variance (low-skilled) occupation. The model explains when individual pecuniary incentives may not reduce under-investment in education, and suggests alternative solutions to improve outcomes.

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    File URL: http://www.accessecon.com/pubs/VUECON/vu00-w41.pdf
    File Function: First version, 2000
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    Bibliographic Info

    Paper provided by Vanderbilt University Department of Economics in its series Vanderbilt University Department of Economics Working Papers with number 0041.

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    Date of creation: Oct 2000
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    Handle: RePEc:van:wpaper:0041

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    Web page: http://www.vanderbilt.edu/econ/wparchive/index.html

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    1. David M. Cutler & Edward L. Glaeser, 1995. "Are Ghettos Good or Bad?," NBER Working Papers 5163, National Bureau of Economic Research, Inc.
    2. Benabou, Roland, 1993. "Workings of a City: Location, Education, and Production," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 619-52, August.
    3. Bisin, A. & Verdier, T., 1997. "On the Cultural Transmission of Preferences for Social Status," DELTA Working Papers 97-04, DELTA (Ecole normale supérieure).
    4. 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.
    5. Heckman, James J & Sedlacek, Guilherme, 1985. "Heterogeneity, Aggregation, and Market Wage Functions: An Empirical Model of Self-selection in the Labor Market," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1077-1125, December.
    6. George J. Borjas, 1994. "Ethnicity, Neighborhoods, and Human Capital Externalities," NBER Working Papers 4912, National Bureau of Economic Research, Inc.
    7. Chaim Fershtman & Yoram Weiss, 1991. "Social Status, Culture and Economic Performance," Discussion Papers 1007, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    8. Bernheim, B Douglas, 1994. "A Theory of Conformity," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 841-77, October.
    9. Piketty, Thomas, 1998. "Self-fulfilling beliefs about social status," Journal of Public Economics, Elsevier, vol. 70(1), pages 115-132, October.
    10. Basu, Kaushik, 1989. "A Theory of Association: Social Status, Prices and Markets," Oxford Economic Papers, Oxford University Press, vol. 41(4), pages 653-71, October.
    11. George A. Akerlof, 1997. "Social Distance and Social Decisions," Econometrica, Econometric Society, vol. 65(5), pages 1005-1028, September.
    12. Fershtman, C. & Murphy, K.M., 1993. "Social Status, Education and Growth," Papers 8-93, Tel Aviv.
    13. Heckman, James J & Honore, Bo E, 1990. "The Empirical Content of the Roy Model," Econometrica, Econometric Society, vol. 58(5), pages 1121-49, September.
    14. Cornell, Bradford & Welch, Ivo, 1996. "Culture, Information, and Screening Discrimination," Journal of Political Economy, University of Chicago Press, vol. 104(3), pages 542-71, June.
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