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Students' Wage Expectations in Germany - New Evidence considering Tax Adjusted Estimates

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  • Pfeifer, Gregor
  • Witte, Stefan

Abstract

This paper uses a rich dataset derived from a three-year survey to gain insights about the informational background of University applicants. We analyze the extent to which students expectations of their starting and future salary depend on different characteristics. More precisely, the paper investigates whether students with different backgrounds tend towards making larger or smaller errors when estimating salaries. The results point out that students salary estimates are heterogeneous and that this variation is correlated with individual traits and chosen subjects. Overall, students substantially underestimate actual starting salaries by about 20 percent. However, a prime finding of this paper is that estimation errors are highly attributable to students misconception of the German progressive income tax system. Correcting for the erroneous gross-net conversion, we find applicants to have a quite correct idea about what salaries to expect in the future. Overall, applicants adjusted expectations are in line with labor market outcomes. However, expectations remain strongly correlated with personal traits.

Suggested Citation

  • Pfeifer, Gregor & Witte, Stefan, 2014. "Students' Wage Expectations in Germany - New Evidence considering Tax Adjusted Estimates," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100354, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc14:100354
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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