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Selective Migration, Occupational Choice, and the Wage Returns to College Majors

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  • Tyler Ransom

Abstract

I examine the extent to which the monetary returns to college majors are influenced by selective migration and occupational choice across locations in the US. To quantify the role of selection, I develop and estimate an extended Roy model of migration, occupational choice, and earnings where, upon completing their education, individuals choose a location in which to live and an occupation in which to work. In order to estimate this high-dimensional choice model, I make use of machine learning methods that allow for model selection and estimation simultaneously in a non-parametric setting. I find that OLS estimates of the return to business and STEM majors relative to education majors are biased upward by 15% at the median. Selection is strongest in locations in the Northeastern US.

Suggested Citation

  • Tyler Ransom, 2021. "Selective Migration, Occupational Choice, and the Wage Returns to College Majors," Annals of Economics and Statistics, GENES, issue 142, pages 45-110.
    • Handle: RePEc:adr:anecst:y:2021:i:142:p:45-110
    DOI: https://doi.org/10.15609/annaeconstat2009.142.0045
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    2. Paul S. Davies & Michael J. Greenwood & Haizheng Li, 2001. "A Conditional Logit Approach to U.S. State‐to‐State Migration," Journal of Regional Science, Wiley Blackwell, vol. 41(2), pages 337-360, May.
    3. Bayer, Patrick & Khan, Shakeeb & Timmins, Christopher, 2011. "Nonparametric Identification and Estimation in a Roy Model With Common Nonpecuniary Returns," Journal of Business & Economic Statistics, American Statistical Association, vol. 29(2), pages 201-215.
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    9. Ransom, Michael R. & Phipps, Aaron, 2016. "The Changing Occupational Distribution by College Major," IZA Discussion Papers 10193, Institute of Labor Economics (IZA).
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    11. Koşar, Gizem & Ransom, Tyler & van der Klaauw, Wilbert, 2022. "Understanding migration aversion using elicited counterfactual choice probabilities," Journal of Econometrics, Elsevier, vol. 231(1), pages 123-147.
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    14. Tyler Ransom, 2022. "Labor Market Frictions and Moving Costs of the Employed and Unemployed," Journal of Human Resources, University of Wisconsin Press, vol. 57(S), pages 137-166.
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    Cited by:

    1. Zhu,Yu & Xu, Lei, 2022. "Returns to Higher Education - Graduate and Discipline Premiums," GLO Discussion Paper Series 1091, Global Labor Organization (GLO).
    2. Arpita Patnaik & Matthew J. Wiswall & Basit Zafar, 2020. "College Majors," NBER Working Papers 27645, National Bureau of Economic Research, Inc.
    3. Fernando Saltiel, 2019. "What's Math Got to Do With It? Multidimensional Ability and the Gender Gap in STEM," 2019 Meeting Papers 1201, Society for Economic Dynamics.

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    More about this item

    Keywords

    Vocational Education; Returns to Skills; Unobserved Heterogeneity;
    All these keywords.

    JEL classification:

    • I2 - Health, Education, and Welfare - - Education
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics

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